Asset Sale vs. Share Sale in Canada: How Structure Affects Your Outcome

In a share sale, the buyer purchases the shares of your company and takes on the entire entity — assets, contracts, history, and liabilities. In an asset sale, the buyer purchases selected assets (equipment, inventory, goodwill, customer lists) and typically leaves liabilities behind in your company.

The same business can be sold either way, and the structure often matters as much to your net outcome as the headline price.

For Canadian sellers, a share sale of qualifying small business corporation shares can access the Lifetime Capital Gains Exemption (LCGE), potentially sheltering a large portion of the gain from tax. A share sale also transfers the whole entity, so you walk away cleanly.

Whether your shares qualify for the LCGE depends on specific tests around the company's assets and how long you've held the shares. The exemption limit is indexed and has changed in recent years — confirm the current figure and your eligibility with a CPA before assuming it applies.

Buyers prefer asset sales for three reasons: they can choose which assets to buy and leave unwanted liabilities behind; they avoid inheriting unknown legal or tax exposure tied to the corporation; and they can often 'step up' the tax cost of depreciable assets, generating future deductions.

Because the structure pulls buyer and seller in opposite directions, it becomes a negotiation — sometimes resolved with a price adjustment that shares the tax difference between the parties.

This is general education, not tax or legal advice. The right structure depends on your corporate setup, your shares' eligibility, the buyer's preferences, and current tax rules. Bring in a CPA and a transaction lawyer early — the structure decision is far cheaper to get right before a letter of intent than to fix afterward.