What tax reporting and planning options should I know about for the money from selling my business?

When the sale closes, tax comes before planning for the money. The result depends on what you sold, shares or business assets, and who owned it, so this page covers three federal items and does not decide what applies to you. A tax professional should look at your own figures before you file or spend.

Reporting the gain

For individuals, the Canada Revenue Agency says you report the disposition of capital property in the calendar year you sell it, and that you must report the capital gain on your income tax and benefit return. You use Schedule 3, Capital gains or losses, to work out your taxable capital gains or net capital loss.

If you are paid over time

The CRA says that when you receive the sale price over a number of years, you may be able to claim a reserve. The CRA says that, generally, the maximum period over which most reserves can be claimed is four years, so the total gain is included in income over five years. Generally you cannot claim a reserve if you were not a resident of Canada at the end of the year or at any time in the following year, were exempt from tax at those times, or sold the property to a corporation you control in any way. You claim it on Form T2017. Longer periods apply to some transfers; see the CRA page. If your price is paid in instalments, see Can a vendor take-back note convert into equity if I default?.

The lifetime capital gains deduction

The CRA says that if you have a capital gain on the sale of certain properties, you may be eligible for the lifetime capital gains deduction. Those properties include qualified small business corporation shares. You calculate it on Form T657 and claim it on line 25400. Whether your shares qualify turns on conditions in the Income Tax Act, so have your accountant test them well before closing.

Choosing an advisor

The Financial Consumer Agency of Canada has guidance on choosing a financial advisor, including how advisors are paid and how to check whether they are registered. Use it before you hire someone to help with the proceeds.