Why Tax Planning for a Business Sale Should Start Years Before the Deal Closes

Selling a business is one of the most significant financial transactions an entrepreneur will ever undertake. Whether you're planning to sell a portion of your company to bring in new investors or aiming for a full exit, minimizing the tax burden on that sale requires deliberate and early planning — often years in advance.

At Prasad & Company LLP, we work closely with business owners across industries to help them maximize their return on investment (ROI) and minimize the tax hit when it comes time to sell. If you're even remotely considering a sale — now or in the next five to ten years — you should be speaking to us now.

Why Early Planning Matters

Tax optimization for M&A transactions isn’t something that can be rushed in the weeks before closing. Many of the most effective tax strategies require:

• Meeting holding period requirements (such as the 24-month QSBC share rule for the Lifetime Capital Gains Exemption)
• Corporate restructuring to ensure the right assets are in the right entities
• Purification of the balance sheet to qualify for key tax benefits
• Family trust structures to multiply exemptions and minimize overall tax

Without the luxury of time, many of these planning opportunities disappear—and so does your potential tax savings.

Key Planning Areas to Consider

1. Lifetime Capital Gains Exemption (LCGE)

The LCGE allows for over $1 million in capital gains to be sheltered from tax — but only if your shares qualify as QSBC shares. Meeting the eligibility criteria often requires active purification and advance planning.

2. Family Trusts & Ownership Structures

Family trusts can enable multiplication of the LCGE among multiple beneficiaries, allowing for significant tax savings. However, these structures must be set up well in advance to satisfy timing and ownership rules.

3. Asset vs. Share Sale Considerations

Buyers typically prefer asset purchases for tax reasons, while sellers benefit more from share sales. Structuring the company in a way that makes a share sale attractive to buyers — and minimizes recapture or other tax exposure — takes careful planning.

4. Corporate Reorganizations

Whether it's rolling assets into a holding company, introducing a trust, or performing a Section 86 or 85 rollover, reorganizations must be completed — and often seasoned — years before a sale to achieve optimal outcomes.

5. Succession & Estate Planning

A sale event is a critical moment to consider broader succession and estate planning. Aligning your M&A strategy with your personal wealth goals can protect your legacy and streamline post-sale transitions.

What Happens Without a Plan?

We’ve seen too many business owners leave hundreds of thousands — or even millions — of dollars on the table by waiting too long to prepare. Common consequences of poor planning include:

• Losing eligibility for the LCGE
• Triggering unnecessary capital gains or dividend tax
• Paying more tax on recapture from depreciable assets
• Overpaying legal and accounting fees due to last-minute restructuring

The Bottom Line: Talk to Us Now

You don’t need to have a buyer lined up or even a timeline in place. If you’re thinking about selling within the next 3 to 10 years, the best time to start planning is now.

At Prasad & Company LLP, we specialize in pre-sale structuring, tax planning, and M&A advisory for owner-managed businesses. Our team can help you:

• Assess your current tax position and sale-readiness
• Identify restructuring opportunities
• Set up tax-efficient holding companies or family trusts
• Work with your legal team and M&A advisors to execute a successful exit

Let’s Build Your Exit Strategy Together

Your business is likely your most valuable asset — don’t wait until the last minute to plan your exit. Contact us today to discuss how we can help you structure, optimize, and prepare for a successful, tax-efficient sale.