How do I get my personal finances in order before selling my business?

A sale changes your own finances as much as the company’s. BDC says planning well in advance makes a big difference whether your goal is a comfortable retirement, a legacy or staying involved. Your personal position is part of that plan, and it is worth reviewing while you still have time to change it.

Decide what the sale must fund

BDC notes that owners may want to maximize the sale price to fund retirement, money for family or charity, or other ventures. Write down what you need after the sale, including living costs, debts and anything you plan to start. That figure is yours to calculate with a planner, and it shapes what terms you can accept, including whether any of the price is paid over time.

Separate personal and business money

List every personal tie to the business: loans you made to it, loans it made to you, and any debt you personally guaranteed. Ask your accountant and lawyer how each would be handled at closing, and whether a buyer would take it over. Tidy records also help, because BDC advises maintaining good record-keeping as part of preparing to sell.

Ask how proceeds will be taxed

BDC says an accountant can help structure a transaction to minimize tax liability. The CRA says most people can claim a capital gains reserve when they dispose of capital property, and that generally the maximum period over which most reserves can be claimed is four years, with the gain included in income over five years. It describes a longer period for certain transfers, such as some transfers to a child, and lists situations where you generally cannot claim a reserve, including selling to a corporation you control in any way, so confirm that yours is not among them.

Remember the closing paperwork

• The CRA says that if the business has employees, you must close the payroll account.
• If it has a GST/HST account, you must contact your tax services office to close it.
• Ask whether a joint GST/HST election with the buyer is available; the CRA says it cannot be made if you sell only one or more assets, or if you are a registrant and the purchaser is not.