Share Sale vs Asset Sale After-Tax Calculator
The buyer wants the assets. You want to sell the shares. Work out what you actually keep under each structure after corporate tax, recapture, the capital dividend account and the tax to get the money into your hands, and the exact premium the buyer would have to pay to make an asset deal equal.
difference to you
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How the Asset Sale Is Taxed Inside the Corporation
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Getting the Money Out After an Asset Sale
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Points to Settle Before the Letter of Intent Is Signed
What to Do Next
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Disclaimer: This calculator uses 2026 Ontario rates, being 12.2% on active business income to $500,000 and 26.5% above it, 50.17% on investment income with 30.67% refundable, a dividend refund of $38.33 per $100 of taxable dividend, 47.74% on non-eligible dividends personally and 26.77% on capital gains personally, with a lifetime capital gains exemption of $1,275,000. Goodwill is treated as having no cost so that the full allocation is a capital gain. Inventory is assumed to be sold at cost. Equipment proceeds are assumed not to exceed original cost. The premium figure is an estimate derived from the effective rate on the asset deal, not a precise solve. The alternative minimum tax, capital gains reserves, safe income, paid-up capital, the denial of capital losses on winding up, land transfer tax and provincial variations are not modelled. This page is general information, not tax advice, and no deal should be structured on it.
The Buyer Wants Assets. You Want Shares.
Almost every private business sale starts with this disagreement, and it is not a matter of taste. Each side is pursuing a real financial advantage, and both are right about their own position.
| Factor | Share Sale | Asset Sale |
|---|---|---|
| Who is taxed | You personally, once | The corporation, then you again on extraction |
| Capital gains exemption | Available if the shares qualify | Not available at all |
| Buyer’s cost base | Inherits your depreciated values | Fresh cost base to depreciate |
| Buyer’s liability risk | Inherits everything, known and unknown | Takes only what is listed |
| Land transfer tax | None | Payable on any real property |
| HST | Not applicable | Applies unless the section 167 election is made |
| Contracts and licences | Usually continue | Frequently need consent to assign |
The disagreement is worth a number, not an argument. Once you know what each structure leaves you, the conversation stops being about principle and becomes a price negotiation. That is the single most useful thing you can bring to the table, and it is what the premium figure in this calculator gives you.
What Happens in an Asset Sale
The corporation sells its property, so the corporation is taxed first. Every category is taxed differently, and the rate ranges from 12.2% to 50.17% depending on what is being sold.
| Asset | Tax Treatment | Corporate Rate |
|---|---|---|
| Goodwill with no cost | Capital gain, half taxable | 50.17% on the taxable half |
| Equipment above undepreciated cost | Recapture, fully taxable as business income | 12.2% to $500,000, then 26.5% |
| Inventory | Business income to the extent it exceeds cost | 12.2% to $500,000, then 26.5% |
| Real property, up to original cost | Recapture of capital cost allowance claimed | 12.2% to $500,000, then 26.5% |
| Real property, above original cost | Capital gain, half taxable | 50.17% on the taxable half |
| Accounts receivable | Usually at book value, section 22 election available | No gain if sold at book |
Then the money has to reach you. The non-taxable half of every capital gain lands in the capital dividend account and can be paid out entirely tax free. The rest comes out as a taxable dividend, partly offset by the refundable tax the corporation recovers, and taxed personally at up to 47.74%.
Recapture Is the Part That Surprises People
Equipment written down to $150,000 and sold for $400,000 produces $250,000 of recapture. That is not a capital gain. It is ordinary business income, fully taxable, and it arises because the corporation deducted depreciation it turned out not to have suffered.
Sellers routinely assume a sale of used equipment above book value is a capital gain. It is not, until the price exceeds what the corporation originally paid, and on used equipment it almost never does.
Goodwill and the Capital Dividend Account
Goodwill is the seller’s friend in an asset deal. Where it was built up rather than purchased, its cost is nil, so the whole allocation is a capital gain. Half is taxable at the investment income rate, and half credits the capital dividend account, from which it can be paid to you entirely tax free.
That is why the allocation between goodwill and equipment is the real negotiation in an asset deal. Every dollar moved from equipment to goodwill takes a dollar out of recapture and puts fifty cents into a tax-free distribution.
The allocation has to be agreed in the agreement and reported consistently. Both parties file on the basis of the same allocation, and the CRA compares them. An allocation that is not commercially reasonable can be challenged, and a buyer who later reports it differently creates a problem for you as well as for themselves.
What Happens in a Share Sale
You sell the shares personally. There is no corporate tax at all, because the corporation has not disposed of anything. The gain is the price less the adjusted cost base of the shares, half is taxable, and where the shares are qualified small business corporation shares the lifetime capital gains exemption shelters up to $1,275,000 per shareholder in 2026.
Where a spouse or adult children hold qualifying shares, each has their own exemption. Two shareholders shelter $2,550,000 of gain between them, which at the top Ontario rate is worth roughly $682,000 of tax.
HST and the Section 167 Election
An asset sale is a supply of property and HST applies. Where substantially all of the assets needed to carry on the business are transferred and both parties are registrants, the election under section 167 on Form GST44 removes HST from the transaction. It is filed by the purchaser with their return.
Real property is not covered by that election. Where the corporation owns its premises, the purchaser self-assesses the HST on closing, which is neutral for a registrant buyer but has to be handled properly in the closing documents. A share sale sidesteps the question entirely.
The Premium the Buyer Has to Pay
If a share sale leaves you with more, the asset deal is only acceptable at a higher price. The premium is the amount that has to be added to an asset price to leave you in the same position, and expressing the argument that way changes the negotiation completely.
Buyers are frequently willing to pay part of it, because the fresh cost base on depreciable assets has real value to them and the liability protection has real value too. What they will not do is pay it if nobody puts the number in front of them.
Other Levers Worth Knowing About
- Hybrid sale: some assets sold by the corporation and the shares sold as well, structured so the exemption is used and the buyer gets a stepped-up base on part of the value
- Retiring allowance: a payment to a long-serving owner-employee, deductible to the corporation and partly transferable to an RRSP for pre-1996 service
- Non-competition payments: caught by section 56.4, which generally treats them as ordinary income unless a specific election is made
- Capital gains reserve: where the price is paid in instalments, the gain can be spread over up to five years
- Section 22 election: on accounts receivable in an asset sale, giving the seller a deduction and the buyer an income inclusion
- Purification in advance: the 24-month test means the balance sheet has to be clean two years before closing, not two weeks
What This Calculator Does Not Model
- The alternative minimum tax on a large gain sheltered by the exemption
- Paid-up capital and the wind-up sequence, including the denial of capital losses under subsection 40(3.6)
- Land transfer tax on real property in an asset deal, which is a buyer cost affecting the price
- Safe income and subsection 55(2) on any pre-closing dividend
- Earn-outs and vendor take-back notes, which have their own timing rules
- Provinces other than Ontario, which have different corporate and personal rates
Model this before the letter of intent, not after. Structure is far harder to change once a price and a deal shape have been agreed in principle, and the capital gains exemption depends on tests that look back 24 months. Our capital gains planning service covers the qualification review, the purification plan and the structure comparison on your actual numbers.
Frequently Asked Questions
Common questions from owners negotiating an exit.
Related Calculators and Guides
More tools for owners preparing an exit.
Bring a Number to the Negotiation, Not an Argument
Send us the letter of intent and the last two years of financial statements. We will model both structures on your actual figures, test whether the shares qualify for the exemption, and give you the premium figure to put in front of the buyer.