Planning Your Exit Strategy And Timeline 2025 — How To Sell, Retire, Or Transfer Your Business Tax-efficiently

Exiting a business successfully is one of the most critical financial decisions an entrepreneur will ever make. In 2025, new CRA valuation rules, capital gains inclusion changes, and enhanced scrutiny under Bill C-208 make early planning essential. Mackisen CPA Auditors Montreal builds comprehensive exit strategies that integrate valuation, tax optimization, and succession planning to ensure you leave your business on your terms—tax-efficiently, profitably, and with peace of mind.

Legal and Regulatory Framework

Income Tax Act (Canada) Section 110.6(2.1): Establishes the Lifetime Capital Gains Exemption (LCGE) of $1,016,836 for the sale of qualified small business corporation (QSBC) shares.
Section 84.1: Prevents dividend recharacterization during related-party transfers; Bill C-208 (2021) allows family transfers when genuine management succession occurs.
Section 85(1): Permits tax-deferred rollovers of property to a corporation, often used to restructure ownership before a sale.
Section 70(5): Deems capital property disposed of at fair market value upon death—vital for integrating estate and exit planning.
Section 55(2): Restricts surplus stripping through intercorporate dividends; Mackisen structures reorganizations to remain fully compliant.
Section 20(1)(a): Allows deduction of professional fees related to business sale or valuation.
Taxation Act (Quebec): Aligns with federal legislation but requires provincial LCGE and reorganization filings. Mackisen coordinates with Revenu Québec to ensure all transactions are reported accurately across jurisdictions.

Key Court Decisions

McClurg v. Canada (1990): Upheld share reorganizations for legitimate business or estate purposes, legitimizing family transitions.
Poulin v. The Queen (2016): Confirmed that family trusts qualify for LCGE when valuation and documentation standards are met.
Kieboom v. The Queen (1992): Recognized family share reallocations as valid when economic value is transferred fairly.
Grosso v. The Queen (2014): Emphasized the importance of maintaining active-business asset ratios to retain LCGE eligibility.
These precedents establish that early documentation, accurate valuation, and clear purpose define a defensible and tax-efficient exit.

Why CRA Targets Business Exits

CRA audits focus on business sales to ensure that capital gains are correctly calculated, related-party transactions are properly disclosed, and LCGE claims are justified. Common triggers include undervalued share transfers, missing valuation reports, and insufficient documentation for Bill C-208 compliance. CRA also flags discrepancies between purchase-and-sale agreements and filed tax returns. Mackisen CPA Auditors prevent reassessment risk by managing valuations, ensuring proper documentation, and aligning sale contracts with CRA disclosure requirements.

Mackisen’s Strategy

1. Timeline Planning — We build a customized 3–5 year roadmap to prepare your business for sale or succession, including corporate cleanup, debt reduction, and value optimization.

2. Valuation and Appraisal — Our Chartered Business Valuators (CBVs) prepare CRA-defensible reports that determine fair market value and justify sale pricing.

3. Share Reorganization and Estate Freeze — Freeze your current share value, issue new shares to family members or trusts, and lock in future growth for successors.

4. LCGE Maximization — Ensure all shareholders qualify for the LCGE to maximize tax-free proceeds.

5. Sale Structuring — Compare share versus asset sales, determine the most tax-efficient structure, and prepare documentation under Sections 85 and 84.1.

6. Due Diligence Management — Coordinate with lawyers, buyers, and CRA to streamline the transaction and avoid closing delays.

7. Post-Sale Planning — Move proceeds into holding companies or RRSP/IPP structures to manage retirement income and estate tax.

Real Client Experience

A Montreal manufacturing owner approached Mackisen five years before retirement. We structured a share freeze, executed Bill C-208-compliant transfers to his children, and multiplied the LCGE across three shareholders, saving $1.4 million in tax. A Quebec technology firm owner sold his company for $6 million. Mackisen handled valuation, LCGE optimization, and estate integration, reducing his effective tax rate from 47 percent to 24 percent.

Common Questions

When should I start planning my exit? Ideally 3–5 years in advance to ensure LCGE eligibility, purification, and valuation preparation.
Can I sell to my children without losing LCGE? Yes, under Bill C-208 if the family corporation retains control and meets CRA’s management continuity test.
Should I sell assets or shares? Shares generally qualify for LCGE; asset sales may create double taxation. Mackisen models both scenarios.
How does valuation affect tax? An independent valuation supports FMV claims and prevents CRA from reassessing sale proceeds.

Why Mackisen

Mackisen CPA Auditors Montreal are Canada’s authorities in exit planning, valuation, and succession tax strategies. Our CPAs, CBVs, and tax lawyers create integrated plans that optimize value, minimize tax, and ensure compliance with both CRA and Revenu Québec. Whether you’re retiring, selling, or transferring your business, we handle every stage—from analysis to post-sale wealth management—with precision and integrity. Call Mackisen CPA Auditors Montreal today for your 2025 Business Exit Planning Consultation. The first meeting is free and customized to secure your financial legacy.