Your client is selling a business: a guide for accountants

Refer a client to an M&A advisor about two years before they want to sell, or as soon as an offer arrives. The accountant’s part is building statements and an add back schedule that hold up in a buyer’s review. Purification and tax planning for the capital gains exemption come from the same file, and both take months.

Why the accountant usually hears first

When an accountant’s client is selling a business, the accountant is often the first professional to hear about it. In January 2023 the Canadian Federation of Independent Business reported that 76 percent of small business owners plan to exit their business within the next decade. To build a succession plan, 43 percent turn to an accountant, and 24 percent work with a lawyer, the next profession on the list.

The same research found that 9 percent of owners had a formal succession plan in place. BDC’s September 2025 Business Transition Survey, as BDC reported in August 2026, put the figure at 24 percent among businesses likely to exit within five years. BDC also notes that a full transition often takes three to five years, against the two years owners expect. Readiness for that transition was the theme of Canada’s Succession Summit 2026 in Calgary.

Signs a client is getting ready

Owners tend to raise a sale indirectly, through questions in the work you already do for them. These are the ones worth noticing.

• The client asks what the company is worth, or what the lifetime capital gains exemption would shelter.
• Someone has approached them with an offer for the business, and they want to know whether the number is fair.
• They start separating personal costs from the company’s, or ask how the statements would look to an outsider.
• They ask about moving investments or a building out of the corporation, which is often purification under another name.
• They hire someone to run operations and begin to step back from the daily work.
• Their family circumstances change, through a health matter or children who have chosen other careers.

When to refer a client to an M&A advisor

The useful moment to refer is about two years before the client wants to be out. Preparation that raises the price takes about a year to show in the statements a buyer reads, and a confidential sale then runs six to ten months from going to market to closing. Preparing a business for sale describes that year.

Refer at once when an offer is already on the table, since the terms of a signed letter of intent are hard to move. Business broker, M&A advisor, or selling it yourself sets the three routes side by side. The client can also run the Quick AI valuation anonymously beforehand and bring the range to your next meeting.

The accountant’s work before a sale

Most of what a buyer tests in diligence starts in your file. Four pieces of work carry the most weight.

Statements. Buyers want three years prepared on one consistent basis, with tax returns that reconcile to them. A buyer or its lender may also ask for reviewed statements in place of compiled ones, which is worth knowing early because of the referral rule further down.

The add back schedule. Adjusted earnings are the figure the price is set on, so each add back needs an amount and a document behind it. The piece on add backs buyers accept covers which ones hold up in a buyer’s quality of earnings review.

Purification. A share sale qualifies for the exemption when the corporation passes the CRA’s asset tests. At the time of sale, 90 percent or more of the asset value must be used mainly in an active business carried on primarily in Canada, and more than 50 percent throughout the 24 months before. Excess cash and investments have to move out early to meet the second test, and purifying a company for the exemption covers the methods.

Tax planning. The lifetime capital gains exemption is $1.25 million for dispositions after June 24, 2024, and the CRA’s indexation table sets it at $1,275,000 for 2026. Whether the buyer takes shares or assets decides whether it applies at all, and share sale or asset sale sets out the difference.

A pre-sale readiness checklist

Work through it with the client a year or two before the sale. Each item answers a request a buyer’s accountant will make.

1. 01Prepare three years of statements on one basis, and reconcile each year to the tax return.
2. 02Move personal and family costs off the company’s books for at least the last full year before the sale.
3. 03Build the add back schedule, with an invoice or payroll record behind every line.
4. 04Settle or document shareholder loans and the balances owed between related companies.
5. 05Test the balance sheet against the QSBC asset tests now, and plan any purification while the 24 month window still works in the client’s favour.
6. 06Confirm how much of each shareholder’s lifetime capital gains exemption remains, from their CRA records.
7. 07Bring the minute book and the share register up to date, so the buyer’s lawyer finds the owners the client expects.
8. 08Pull twelve months of balance sheets, so a working capital target can be set from real figures.
9. 09Check that HST and payroll remittances are current, since a buyer will look at both in diligence.
10. 10Model what the client keeps after tax and the costs of the sale, using the steps in net proceeds from a sale.

During the sale

Once a buyer signs a letter of intent, you become the person who answers the financial questions. The buyer’s accountant will run a quality of earnings review, a month by month test of the profit the price was set on, and most of their questions land on your desk. The due diligence checklist lists what they usually ask for.

Working capital is the item most likely to move money late in the deal, because the target is compared with the actual balance on closing day. The client’s representations about the statements also back a holdback, which holdbacks, escrow and warranties explains. Where diligence finds a gap, your schedule is usually what repairs it, and when a business sale falls through covers the common breaks.

How a confidential process protects your relationship

An accountant who refers a client lends their own reputation to the advisor, and the worry is that word of a sale reaches staff or customers. In a staged process the business is shown to buyers first as an anonymous profile. Its name and statements go to one buyer at a time, after a non-disclosure agreement and with the owner’s approval, as selling a business confidentially sets out.

InvestDeal works this way and is paid five percent of the sale price, charged only when the sale closes. It pays referral partners a share of that success fee on closing, under a referral agreement signed before the introduction. The partner is kept informed of progress, and the client decides what else to share with them.

Check your own professional rules first. In Ontario, Rule 216 of the CPA Code prohibits compensation for referring an assurance client to others, according to CPA Ontario’s guidance. For other clients a referral fee is permitted once you have weighed the threat to your objectivity. Where that threat is more than clearly insignificant, you disclose the fee to the client in writing and obtain their consent before you receive it.

CPA Ontario’s own example places a client receiving compilation and tax services on the permitted side. CPA Alberta’s rules carry a Rule 216 of their own, and members elsewhere should read their provincial code. An accountant selling a practice of their own will find fee based pricing and client consent covered in selling an accounting practice.

Questions owners ask

When should an accountant refer a client to an M&A advisor?

The useful moment is about two years before the client wants to close. Preparation takes roughly a year to show in the statements, and a confidential sale runs six to ten months after that. Refer at once if the client has received an offer or a letter of intent.

How many business owners ask their accountant about succession?

In CFIB’s January 2023 succession research, 43 percent of owners said they turn to an accountant to build a succession plan, against 24 percent who work with a lawyer. The same research found that 76 percent plan to exit their business within the next decade.

Can a CPA accept a referral fee for introducing a client to a sale advisor?

It depends on the provincial code and the client. In Ontario, Rule 216 prohibits compensation for referring an assurance client. For other clients it is permitted with safeguards, including written disclosure and the client’s consent before the fee is received. InvestDeal pays referral partners a share of its success fee on closing.

What should an accountant prepare before a client sells?

Start with three years of consistent statements reconciled to the tax returns, and an add back schedule with a document behind each line. Then test the balance sheet against the QSBC asset tests and confirm how much of each shareholder’s capital gains exemption remains.