---
title: "Share Sale vs Asset Sale in Canada: Which Way to Sell"
url: https://www.everstonecpa.com/blog/share-sale-vs-asset-sale-canada
description: "Share sale vs asset sale: who pays the tax, the $1.25M capital gains exemption on shares, GST44 election on assets and a comparison table. Compare them."
type: guide
updated: 2026-11-11
summary: "In a share sale the owner sells the corporation; the gain is personal, half of it is taxable, and on qualified small business corporation shares the lifetime capital gains exemption can shelter up to $1,250,000 of it. In an asset sale the corporation sells what it owns; it pays tax on the gains and recapture, and the owner pays again to take the cash out."
faq_count: 7
publisher: EverStone CPA Inc., a Chartered Professional Accountant firm registered with CPA British Columbia and CPA Alberta
service_area: British Columbia, Alberta, Ontario and Manitoba
language: en-CA
contact: info@everstonecpa.com · https://www.everstonecpa.com/book-online
---

[Home](https://www.everstonecpa.com/) [Blog](https://www.everstonecpa.com/blog) Share sale vs asset sale in Canada: which way to sell, and who pays the tax

Selling a business

# Share sale vs asset sale in Canada: *which way to sell, and who pays the tax*

By EverStone CPA · Updated November 2026 · 7 min read

**Quick answer:** In a share sale the owner sells the corporation; the gain is personal, half of it is taxable, and on qualified small business corporation shares the lifetime capital gains exemption can shelter up to $1,250,000 of it. In an asset sale the corporation sells what it owns; it pays tax on the gains and recapture, and the owner pays again to take the cash out. Sellers prefer shares; buyers prefer assets, because they get a fresh cost base and leave the corporation’s history behind. The price usually moves to bridge the gap.

**Selling, and the buyer wants assets?** We model both structures on your numbers, check whether the shares qualify for the exemption, and work with your lawyer on the election and the closing. Quoted up front. [Get My Fixed Quote](https://www.everstonecpa.com/book-online?service=t2#enquiry-form)

## Key takeaways

- Share sale: one level of tax, personal, on half the gain; the LCGE can shelter up to $1,250,000 of gain on qualifying shares.
- Asset sale: the corporation pays on the gains and recapture, then the owner pays to extract the proceeds; two levels of tax.
- Buyers prefer assets for the stepped-up cost base, the CCA on it and the clean break from past liabilities.
- In an asset sale, the GST44 election lets the parties sell a whole business without charging GST/HST, if the conditions are met and the form is filed on time.
- The exemption needs the shares to qualify at the sale date and for the 24 months before; purification often has to start well ahead.

## What is actually being sold

A business can be sold two ways. In a **share sale**, the shareholder sells the shares of the corporation to the buyer. The corporation continues, with its assets, contracts, employees, tax accounts and history intact; only the owner changes. In an **asset sale**, the corporation sells its assets (equipment, inventory, goodwill, contracts, the customer list) to the buyer, and the shareholder is left owning a corporation that holds cash. The buyer’s own corporation or the buyer personally takes the assets into a new business.

The tax follows the seller. In a share sale the seller is the individual, with one personal gain. In an asset sale the seller is the corporation, and there is a second step before the money is personal.

**Been offered a price and not sure what you keep?** The after-tax figure differs sharply between the two structures. We run both before you answer the offer. See [closing or selling your corporation](https://www.everstonecpa.com/closing-or-selling-your-corporation) or [get a quote](https://www.everstonecpa.com/book-online?service=t2#enquiry-form). [Get My Fixed Quote](https://www.everstonecpa.com/book-online?service=t2#enquiry-form)

## The comparison table

Share sale and asset sale compared from the seller’s and the buyer’s side.

| | Share sale | Asset sale |

| Who sells | The shareholder | The corporation |

| Who is taxed first | The shareholder, on a capital gain | The corporation, on capital gains, recapture of CCA and any income items (inventory, receivables) |

| Second level of tax | None; the proceeds are already personal | Yes, when the corporation pays the after-tax cash out as a dividend or on winding up |

| Inclusion rate | One-half of the gain is taxable | One-half of capital gains; recapture and inventory profit are fully taxable |

| Lifetime capital gains exemption | Available on qualified small business corporation shares, up to $1,250,000 of gain | Not available; the corporation has no exemption |

| Buyer’s cost base | Cost of the shares; the corporation’s asset values are unchanged | Purchase price allocated across the assets; CCA restarts on the new values |

| Past liabilities | Stay with the corporation, so the buyer inherits them, with indemnities | Stay with the selling corporation |

| Contracts, licences, leases | Continue; some require consent on a change of control | Must be assigned, each with consent |

| Employees | Unaffected; the employer is the same corporation | Terminated by the seller and rehired by the buyer, or transferred; severance exposure |

| GST/HST | None on the shares | Charged on taxable assets unless the section 167 election (GST44) applies |

| Non-capital losses | Restricted after the acquisition of control | Stay with the selling corporation |

| Usually preferred by | Seller | Buyer |

## The share sale and the lifetime capital gains exemption

The exemption is what makes a share sale worth so much more to the seller. The CRA’s figure is $1,250,000 of lifetime capital gains exemption for dispositions of qualifying property, which at a one-half inclusion rate is a maximum capital gains deduction of $625,000 of taxable gain. A seller with the full exemption available who sells qualifying shares for a $1,250,000 gain pays no federal tax on it (alternative minimum tax and the provincial rules aside). The same $1,250,000 earned as an asset sale would be taxed in the corporation and again on the way out.

“Qualifying” is the condition that does the work. The shares must be of a small business corporation at the sale date, meaning all or substantially all of its assets are used in an active business carried on primarily in Canada; for the 24 months before, more than 50% of the assets must have met that test; and the seller or a related person must have held the shares for those 24 months. Surplus cash, a rental property or an investment portfolio inside the operating company can fail the test, and “purifying” the corporation by moving those out takes time and has its own tax. The conditions and the planning are in [the lifetime capital gains exemption guide](https://www.everstonecpa.com/blog/lifetime-capital-gains-exemption-canada-small-business), and a [holding company](https://www.everstonecpa.com/blog/holding-company-canada-when-it-makes-sense) is often the structure that keeps the operating company clean.

## The asset sale and the two levels of tax

When the corporation sells its assets, each asset is taxed on its own terms. Goodwill and capital property produce capital gains, half taxable in the corporation. Equipment sold above its undepreciated capital cost produces recapture, fully taxable, as explained in [terminal loss versus recapture](https://www.everstonecpa.com/blog/terminal-loss-canada). Inventory and receivables are income. The corporation pays tax on the total, and the after-tax cash sits in it. Getting that cash to the shareholder is a dividend, taxed personally, or a wind-up with the same effect. Some of the gain can come out tax-free through the capital dividend account (the untaxed half of capital gains), which softens the second level but does not remove it. Our guide to [dissolving a corporation](https://www.everstonecpa.com/blog/dissolving-a-corporation-canada) sets out the wind-up sequence that usually follows an asset sale.

The allocation of the purchase price across the assets is negotiated, and the two sides want opposite things: the buyer wants value on equipment and inventory (fast deductions) and the seller wants it on goodwill (capital treatment). The allocation goes into the agreement and binds both.

## GST/HST on an asset sale: the GST44 election

An asset sale is a supply of each asset, and the taxable ones attract GST/HST, which the buyer pays and then claims back if registered, with the cash-flow cost in between. Section 167 of the Excise Tax Act lets the parties elect out of that. Under the CRA’s memorandum, the supplier must be selling a business or part of a business that it established or carried on; the recipient must acquire all or substantially all of the property that can reasonably be regarded as necessary to carry on the business; and both parties must be in the same registration position, either both registrants or neither. The election is made on [Form GST44](https://www.everstonecpa.com/forms/gst44), and where the recipient is a registrant it must be filed on or before the day the recipient would have had to file a return for the first reporting period in which tax would otherwise have been payable. A late GST44 is a common and expensive miss; put it on the closing checklist.

## Why the buyer wants assets

Three reasons. The buyer gets a cost base equal to what was paid, so CCA restarts on the new values and goodwill is deductible over time; in a share sale the corporation’s old, often fully depreciated, values carry on. The buyer leaves behind whatever the corporation did before: an unknown tax reassessment, a lawsuit, an unpaid remittance, all stay with the seller’s corporation. And the buyer takes only the assets and contracts it wants. A share purchase requires due diligence on the corporation’s whole history and an indemnity from the seller for what diligence misses. Buyers of a loss corporation also find that the non-capital losses are restricted after the change of control, a point covered in [the non-capital loss guide](https://www.everstonecpa.com/blog/non-capital-loss-carryforward-canada), so the losses are rarely worth paying for. The buyer’s side of the decision is in [the buying-a-business checklist](https://www.everstonecpa.com/blog/buying-a-business-bc-checklist).

## How the gap gets bridged

Because the seller nets more from a share sale and the buyer nets more from an asset sale, the structure is part of the price. A seller who insists on shares may accept a lower headline price; a buyer who insists on assets usually pays more. The right comparison is the seller’s after-tax proceeds under each structure, set against the buyer’s after-tax cost, with the exemption, the recapture, the second level of tax and the GST/HST cash flow all in the model. A hybrid, where some assets are sold first and the shares after, is sometimes used to let the seller claim the exemption while the buyer gets a cost base on specific assets; it needs careful sequencing and is a lawyer-and-CPA exercise, not a form.

## A short example

An owner has run an incorporated trades business for twelve years. The corporation’s assets have a tax cost near zero; a buyer offers $1,000,000. As a share sale, the owner’s gain is about $1,000,000 less the small original share cost; if the shares qualify and the owner has not used the exemption, it is within the $1,250,000 limit and the gain is sheltered. As an asset sale at the same price, the corporation reports recapture on the equipment and a capital gain on goodwill, pays tax, and the owner then pays personal tax on the dividend that brings the balance out. The owner keeps less, potentially by a large margin, and the buyer, who would get $1,000,000 of new cost base, offers more for assets than for shares. Which number is higher after tax is the question to answer before signing a letter of intent, with real provincial rates and the actual asset mix.

## The bottom line

Shares give the seller one level of tax and the exemption; assets give the buyer a clean start and a fresh cost base. Confirm the shares qualify well before a sale, keep the operating company clean of passive assets, and if the deal is an asset sale, file the GST44 on time and negotiate the allocation. Price and structure are the same conversation.

Which structure leaves you more depends on the asset mix, the exemption and the buyer; [ask about your own situation](https://www.everstonecpa.com/quick-question) and a CPA replies free, usually the same business day. The wind-down steps after a sale are in [closing or selling your corporation](https://www.everstonecpa.com/closing-or-selling-your-corporation).

Sources

- [Canada Revenue Agency — Line 25400, Capital gains deduction (the $1,250,000 exemption; $625,000 maximum deduction)](https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-25400-capital-gains-deduction.html)

- [Canada Revenue Agency — T4037, Capital Gains (the one-half inclusion rate; the LCGE)](https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4037/capital-gains.html)

- [Canada Revenue Agency — GST/HST Memorandum 14-4, Sale of a business or part of a business (the section 167 election conditions and filing deadline)](https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/14-4/sale-a-business-part-a-business.html)

- [Canada Revenue Agency — Form GST44, Election concerning the acquisition of a business or part of a business](https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/gst44.html)

General information for Canadian business owners, current as of November 2026; not tax, legal or accounting advice, and no client relationship. Rules change, so [speak with a CPA](https://www.everstonecpa.com/book-online?service=t2#enquiry-form) before acting.

About this article

**EverStone CPA** Prepared and reviewed by a CPA at EverStone CPA, serving businesses in BC, Alberta, Ontario and Manitoba. [About the firm →](https://www.everstonecpa.com/about) · [Send an enquiry →](https://www.everstonecpa.com/book-online?service=t2#enquiry-form)

Modelling the two structures and checking the shares qualify is part of [advisory at EverStone](https://www.everstonecpa.com/advisory-services), before the letter of intent is signed.

### Keep reading

[The lifetime capital gains exemption →](https://www.everstonecpa.com/blog/lifetime-capital-gains-exemption-canada-small-business)
[How to dissolve a corporation →](https://www.everstonecpa.com/blog/dissolving-a-corporation-canada)
[When a holding company makes sense →](https://www.everstonecpa.com/blog/holding-company-canada-when-it-makes-sense)
[Buying a business: the checklist →](https://www.everstonecpa.com/blog/buying-a-business-bc-checklist)

FAQ

## Frequently asked questions

**What is the difference between a share sale and an asset sale?**

In a share sale the shareholder sells the corporation itself, with everything in it, and is taxed personally on a capital gain. In an asset sale the corporation sells its assets to the buyer, pays tax on the gains and recapture, and the shareholder is taxed again when the cash is paid out.

**Why do sellers prefer a share sale?**

One level of tax, on half the gain, and on qualified small business corporation shares the lifetime capital gains exemption can shelter up to $1,250,000 of gain. An asset sale is taxed in the corporation and again on extraction, with no exemption.

**Why do buyers prefer an asset sale?**

A cost base equal to the price paid, so CCA and the goodwill deduction restart on the new values; no inherited liabilities or tax history; and the ability to pick which assets and contracts to take.

**How much is the lifetime capital gains exemption?**

$1,250,000 of capital gain on qualified small business corporation shares and qualified farm or fishing property, per the CRA, which at the one-half inclusion rate is a maximum deduction of $625,000 of taxable gain. The shares must meet the asset and holding-period tests.

**Is GST/HST charged on the sale of a business?**

On an asset sale, yes on the taxable assets, unless the parties make the section 167 election on Form GST44: the buyer must acquire all or substantially all of the property needed to carry on the business, both parties must be registrants or both not, and the form must be filed by the buyer’s return due date for the period of the sale. No GST/HST applies to a sale of shares.

**What happens to employees in an asset sale?**

The employer changes. Employees are either terminated by the selling corporation and hired by the buyer, or transferred under terms in the agreement, and the seller may face severance for anyone not taken on. In a share sale the employer is the same corporation and nothing changes.

**Can a buyer use my corporation’s losses after a share sale?**

Only within limits. After an acquisition of control, non-capital losses from before the change can be used only against income from the same or a similar business carried on with a reasonable expectation of profit. Losses are rarely worth paying for.

## Have an offer on the table?

Tell us roughly the price, what the corporation owns and whether the buyer wants shares or assets. A CPA replies by email within one business day with the after-tax comparison we would run and a fixed fee for the work.

[Get My Fixed Quote](https://www.everstonecpa.com/book-online?service=t2#enquiry-form)[Book a Paid Advice Call](https://www.everstonecpa.com/advice-call)

## Have a question about this?

Ask free through [the quick-question form](https://www.everstonecpa.com/quick-question); a CPA replies by email within one business day. For a proper look, a 45-minute **Advice Call** with a CPA is $225 plus applicable tax, booked by email, credited against your first invoice if you become a client within 60 days. Want an accountant to take it on? [Send an enquiry](https://www.everstonecpa.com/book-online?service=monthly#enquiry-form).

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Source: https://www.everstonecpa.com/blog/share-sale-vs-asset-sale-canada
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