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

Exiting your business successfully is not about timing the market—it’s about timing your strategy. In 2025, with higher capital gains inclusion rates, stricter CRA audit focus on business valuations, and new intergenerational transfer rules, proper exit planning determines how much wealth you keep and how smoothly your succession unfolds. Whether your goal is a third-party sale, a family transition, or early retirement, Mackisen CPA Auditors Montreal builds tax-efficient exit timelines that protect your profits, minimize tax exposure, and prepare your legacy for the next generation.

Legal and Regulatory Framework

Income Tax Act (Canada) Section 110.6(2.1): Provides a Lifetime Capital Gains Exemption (LCGE) of $1,016,836 on qualifying small business corporation (QSBC) shares.
Section 84.1: Prevents dividend recharacterization on related-party transactions; Bill C-208 (2021) allows genuine intergenerational transfers that meet CRA’s management and control criteria.
Section 85(1): Permits tax-deferred rollovers when transferring assets to a corporation, useful for pre-sale restructuring or holding company planning.
Section 70(5): Imposes a deemed disposition of all capital property at fair market value upon death—integrating exit planning with estate planning.
Section 55(2): Restricts intercorporate dividends designed to convert surplus into capital gains; Mackisen ensures every pre-sale reorganization is compliant.
Section 20(1)(a): Authorizes deduction of legal, accounting, and valuation costs incurred in completing a sale or transition.
Taxation Act (Quebec): Mirrors these provisions but requires dual filing and provincial recognition for LCGE and rollover transactions. Mackisen ensures coordination between CRA and Revenu Québec to avoid duplication or reassessment.

Key Court Decisions

McClurg v. Canada (1990): Confirmed that share reorganizations for legitimate business purposes are valid and distinguishable from avoidance schemes.
Grosso v. The Queen (2014): Highlighted the importance of maintaining active-business asset thresholds to qualify for LCGE.
Poulin v. The Queen (2016): Approved trust-held shares under LCGE when valuation and documentation were robust.
Kieboom v. The Queen (1992): Affirmed that family share transfers for bona fide business succession qualify for capital gains treatment.
These rulings set the legal precedent for structuring compliant, defensible business exits.

Why CRA Targets Business Exits

CRA scrutinizes business exits to ensure capital gains are correctly reported and that intergenerational transfers comply with Bill C-208 conditions. Common triggers include unreported goodwill, inflated professional fees, undervalued related-party sales, and incomplete share-purchase agreements. CRA’s new 2025 audit algorithm automatically cross-references corporate asset valuations, historical earnings, and LCGE claims to identify discrepancies. Mackisen preemptively neutralizes these audit risks by preparing certified valuations, compliant legal structures, and clear documentation that aligns with CRA expectations.

Mackisen’s Strategy

1. Goal and Timeline Assessment — We align your personal retirement goals, family succession objectives, and liquidity needs to create a 3–5 year exit roadmap.

2. Valuation and Structuring — Determine your company’s fair market value using income, asset, and market methods, ensuring CRA defensibility.

3. Share Reorganization and Estate Freeze — Freeze current business value, issue new shares to family members or trusts, and lock in future growth tax-free.

4. LCGE Maximization — Structure ownership so each eligible shareholder claims up to $1,016,836 tax-free.

5. Corporate and Personal Tax Integration — Coordinate withdrawal strategies (dividends, capital gains, or IPP contributions) for optimal after-tax income.

6. Exit Execution — Manage due diligence, legal closing, and CRA reporting, ensuring clean compliance and maximum proceeds.

7. Post-Exit Wealth Planning — Transition proceeds into holding companies, TFSAs, or estate vehicles to preserve capital and income streams.

Real Client Experience

A Montreal construction company owner wanted to retire in five years. Mackisen structured a share freeze and gradual transfer to his two children under Bill C-208, qualifying each for LCGE and saving $1.6 million in tax. A Quebec retailer sold his corporation for $5 million; Mackisen restructured the sale through a Holdco, utilizing LCGE and RRSP integration to eliminate capital gains on $2 million of proceeds.

Common Questions

How early should I start planning my exit? Ideally three to five years before your target sale to align valuation, purification, and LCGE requirements.
Can I sell to family members and still claim LCGE? Yes, under Bill C-208 if management and shareholding conditions are met for at least 60 months.
What if CRA challenges my valuation? Mackisen provides independent CBV-certified appraisals and documentation to substantiate FMV.
Is it better to sell assets or shares? Shares often qualify for LCGE, while asset sales do not; we calculate both to find your best option.

Why Mackisen

Mackisen CPA Auditors Montreal are Canada’s experts in exit strategy, valuation, and succession tax planning. Our CPAs, CBVs, and tax lawyers create customized exit roadmaps that protect wealth, minimize taxes, and ensure regulatory compliance. Whether your goal is retirement, sale, or generational transfer, we guide you from planning to post-closing with precision. Call Mackisen CPA Auditors Montreal today for your 2025 Business Exit Consultation. The first meeting is free and designed to secure your financial future.