How much you will get from selling your business: net proceeds, step by step
One illustration walked from adjusted earnings to the cash in an owner’s account, one deduction at a time, with the date each part of the money arrives.
In this illustration a $3.6 million share sale leaves the owner about $2.55 million after tax, roughly 71 percent of the headline. Debt and costs come off the price, the five percent fee among them. The capital gains exemption shelters $1,275,000 of the gain, and about 58 percent of the price arrives at closing.
From the price to what you keep
How much will you get from selling your business? The net proceeds of a business sale in Canada are the price less what is paid out of it, minus the tax on what remains, and some of it arrives years after closing. Owners tend to quote the headline. The figure that matters is the one that reaches your account, and when.
This page walks one illustration from adjusted earnings to cash, one deduction at a time. Every assumption is labelled, and each step links to the piece that explains it in full.
The price, from adjusted earnings
Take, as an illustration, a distribution company with $800,000 of adjusted earnings, the profit with the owner’s salary and personal costs added back. Which of those add backs a buyer will accept is its own question, covered in add backs buyers accept.
Manufacturing and distribution businesses sell for 3.0 to 5.5 times adjusted earnings in the ranges our valuation runs on. At $800,000 that is $2.4 million to $4.4 million. The illustration takes an agreed price of $3.6 million, or 4.5 times, for a sale of the owner’s shares.
Where a business lands within its range depends on the factors a buyer weighs, such as the owner’s role and how much revenue repeats. How to value a business sets out the method, and this illustration sits a little above the middle.
The step table
| Step | Amount | What is left |
|---|---|---|
| Agreed price, 4.5 times $800,000 | $3,600,000 | $3,600,000 |
| Bank loan and equipment lease paid out at closing (assumed) | minus $350,000 | $3,250,000 |
| Working capital $40,000 below the agreed target (assumed) | minus $40,000 | $3,210,000 |
| InvestDeal success fee, 5 percent of $3.6 million | minus $180,000 | $3,030,000 |
| Legal and accounting fees (assumed) | minus $60,000 | $2,970,000 |
| Tax on the gain, at the assumed rate below | minus $423,750 | $2,546,250 |
The owner keeps about 71 percent of the headline in this illustration, once every payment has arrived. The debt comes off first because most offers are priced debt free: the buyer pays for a company with its loans cleared, and the payout is taken from the price.
The working capital line follows a target set in the letter of intent. A company handed over with less working capital than the target gives up the difference dollar for dollar, as working capital in a business sale explains. The fee in this illustration is taken on the full price and paid from the closing funds.
When each part of the money arrives
The $3.6 million arrives in four parts. In this illustration, $400,000 is a vendor note and $200,000 an earnout, and $300,000 of the closing cash goes into escrow for 18 months.
| When | Amount | What it depends on |
|---|---|---|
| Closing day | $2,070,000 | Closing cash after the debt and costs in the step table, less the escrow |
| Month 18 | $300,000 | Escrow released, less any claims agreed under the warranties |
| Years 1 to 3 | $400,000 plus interest | Vendor note paid by the buyer in instalments |
| After year 2 | Up to $200,000 | Earnout, paid if the agreed targets are met |
| With the return for the year of sale | minus $423,750 | Tax on the gain, or on part of it where a reserve spreads it |
Cash at closing is $2,070,000, about 58 percent of the headline. The escrow is a holdback against claims under the warranties you give, set out in holdbacks, escrow and warranties.
The note rests on the buyer’s ability to pay, which vendor financing covers along with the security to ask for. The earnout rests on results after you leave, and earnouts explains when one is worth accepting.
The tax on a share sale
The gain is the price for the shares less the costs of selling them and what the shares cost you. Here the shares were issued for a nominal sum when the company was formed, so the gain is $2,970,000.
- 01The lifetime capital gains exemption shelters the first $1,275,000 in 2026, provided the shares qualify on the day of the sale. That leaves $1,695,000.
- 02One half of a capital gain is taxable, which makes $847,500 of taxable gain.
- 03At an assumed combined federal and provincial rate of 50 percent, a round figure chosen for the illustration, the tax is $423,750.
The exemption rules, including the tests the shares must pass, are in the lifetime capital gains exemption, and a company holding surplus cash may need purifying first. Your accountant applies your own province’s rates and checks minimum tax for the year of the sale, which the 2026 changes for sellers explains. A sale to an employee ownership trust draws on a larger exemption, and an employee ownership trust or a third party sale sets its numbers beside an outside sale.
Because $400,000 arrives later as a note, the CRA lets you claim a capital gains reserve on the unpaid part and include the gain over up to five years. An asset sale is taxed differently, inside the company first, and the tax implications of selling a business compare the two.
Run your own figures
Each line in the step table moves with your own deal. A larger loan or a lower working capital count comes straight off the cash, and a larger earnout moves money from closing day to a later date that depends on results.
Take a second offer for the same company, as a further illustration: $3.8 million, with $1 million of it as an earnout and the rest in cash, and the same deductions as before. The headline is $200,000 higher. After the fee of $190,000, the cash at closing comes to $1,860,000, which is $210,000 less than the first offer pays on the day.
The higher offer only pays more if the earnout targets are met. That trade between a larger headline and a smaller certain amount is the comparison reading an offer is built around.
The Net proceeds tool runs the same waterfall on a real offer or on your valuation, and shows which part is certain and which is conditional. To start from a price, the Quick AI valuation gives an early range in a few minutes, before you give anyone your name.
Each stage of a sale, from preparation and valuation to buyers, tax and transition, is set out in how to sell a business in Canada.
Questions owners ask
- How much of the sale price do I keep when I sell my business?
- It depends on what the business owes and on the tax. In the illustration on this page, a $3.6 million share sale leaves about $2.55 million after tax once every payment has arrived, around 71 percent, with $2.07 million of it paid at closing.
- Is the full price paid on closing day?
- Often only part of it is. A vendor note is paid over the following years and an earnout depends on results after the sale. Money held in escrow comes back once the warranty claim period ends. In the illustration, 58 percent of the price arrives at closing.
- How is tax calculated on the sale of my company’s shares?
- The gain is the price for the shares less selling costs and what the shares cost you. The lifetime capital gains exemption shelters up to $1,275,000 of it in 2026 for qualifying shares, and one half of the rest is taxed at your marginal rate.