How to sell a business in Ontario: the rules that are Ontario’s own
The stages of a sale are the same across Canada, and Ontario adds its own tax rules on the gain and on an asset sale. Two of its employment rules also reach the seller who stays on.
An Ontario sale follows the national stages plus five provincial rules. A capital gain at the top bracket costs about 26.76 percent with the surtax. An asset sale brings 13 percent HST, which Form GST44 can remove, and land transfer tax on any building. Employee service passes to the buyer, and employee non-competes are void outside two exceptions.
What belongs to Ontario
If you are working out how to sell a business in Ontario, the stages match a sale anywhere in Canada, from the first valuation to closing day. Our guide to how to sell a business in Canada walks through them in order. This page covers the part that is Ontario’s own: five provincial rules that change what you keep and what you may promise a buyer.
The national rules apply in full alongside them. The lifetime capital gains exemption shelters up to $1,275,000 of gain on qualifying shares in 2026. The choice between a share sale or an asset sale then decides which of the Ontario rules below reach you. Regulated businesses answer to a provincial body as well: the Royal College of Dental Surgeons of Ontario decides who may hold the shares of a dental practice, and a buyer of the assets of a licensed child care centre applies for a licence of its own.
Ontario at a glance
| Topic | The Ontario rule | What it means for a seller |
|---|---|---|
| Tax on a capital gain | 13.16 percent provincial rate above $220,000, plus a surtax on Ontario tax of 20 and 36 percent | About 26.76 percent of each dollar of gain at the top bracket, federal tax included |
| Sales tax on an asset sale | HST at 13 percent | Form GST44 can lift the HST off a sale of substantially the whole business |
| Real estate in the sale | Land transfer tax by bracket, 0.5 to 2.0 percent on commercial land | $26,475 on a $1.5 million commercial building, plus a city tax inside Toronto |
| Employees | Service with you counts as service with the buyer | The link breaks where the buyer hires someone more than 13 weeks after their last day |
| Non-compete | Employee non-competes are void from October 25, 2021 | Two exceptions matter in a sale: the seller who becomes the buyer’s employee, and executives |
Each row is set out below with its source. HST and land transfer tax arise mainly in an asset sale, where the buyer takes title to the equipment and the building directly.
The tax rate on your gain in Ontario
For 2026 the CRA’s table of provincial rates puts Ontario’s top bracket at 13.16 percent on taxable income above $220,000, beside a federal top rate of 33 percent above $258,482. Ontario then adds a surtax. The CRA’s Ontario payroll guide sets it at 20 percent of basic Ontario tax above $5,818, plus 36 percent of the amount above $7,446.
At the top of the scale the surtax lifts Ontario’s 13.16 percent to about 20.53 percent. Add the federal 33 percent and ordinary income is taxed at about 53.53 percent. Half of a capital gain is taxable, so each dollar of gain above the exemption costs about 26.76 cents, which is our arithmetic from the published rates.
Take, as an illustration, a share sale that leaves $1 million of gain above the lifetime exemption. At 26.76 percent the tax is about $267,600. The same gain in Alberta, where the combined top rate is 48 percent, comes to about $240,000, as the Alberta guide shows. Alternative minimum tax and the year each payment falls in are covered in the taxes when you sell a business.
HST when you sell the assets
Ontario charges harmonized sales tax at 13 percent, the federal and provincial parts combined, according to the CRA’s GST/HST rate calculator. On an asset sale priced at $3 million, that is $390,000 of tax on the closing statement.
The election under section 167 of the Excise Tax Act removes it. The CRA’s page on buying an existing business requires the buyer to acquire all or substantially all, at least 90 percent, of the property needed to carry on the business. Buyer and seller elect together on Form GST44, and the buyer files it by the due date of its first return in which the tax would have been payable.
The election is closed to a sale where you are a registrant and the buyer is unregistered. Put the buyer’s GST/HST number in the purchase agreement so the point is settled before closing.
Land transfer tax when the building is included
Where the sale includes a building the company owns, the buyer pays Ontario land transfer tax, due when the transfer is registered. The province’s rate table runs from 0.5 percent on the first $55,000 to 2.0 percent above $400,000. Its 2.5 percent rate above $2 million applies to land with one or two single family residences, so a commercial building stays at 2.0 percent.
On a $1.5 million commercial building the tax is $26,475, from the province’s own formula of the value times 0.02, less $3,525. A building in the City of Toronto may also carry the city’s municipal land transfer tax, which the provincial overview points to.
A buyer counts both taxes as part of what the purchase costs, and that cost can surface in the price. Owners who keep the building and lease it to the buyer move this question out of the sale entirely. Where each cost lands on your side is shown in net proceeds from selling a business.
Your employees and the non-compete you sign
Ontario’s guide to continuity of employment says that where a business is sold and an employee keeps working in it for the new owner, their length of employment flows through to the purchaser. It counts for vacation and leave, and for notice of termination and severance pay. The guide’s own example is an employee with 10 years at the time of a sale, owed the maximum eight weeks of notice if later let go.
The link breaks on timing. Service carries over where the buyer hires the employee within 13 weeks of the earlier of two dates: their last day with you, or the day of the sale. Long service on your payroll is a cost the buyer weighs, and what happens to your employees covers the same question from the human side.
Since October 25, 2021, Ontario’s Employment Standards Act has voided non-compete agreements between employers and employees. The ban came in through the Working for Workers Act, 2021, as the province’s policy manual records. It matters to a seller who stays on, because staying on usually means becoming the buyer’s employee.
The province’s guide to non-compete agreements sets out two exceptions. The first covers the sale or lease of a business run as a sole proprietorship or partnership, where the seller becomes the buyer’s employee immediately after the sale and agrees, as part of the sale, to stay out of competition. The second covers executives, a list that includes a president and a chief executive officer.
An owner who sells the shares of a corporation and stays on as president should have a lawyer confirm which exception the covenant rests on before signing. How long a covenant can run and how far it can reach are set out in non-competes when selling a business.
Where to start
- 01Find out which structure the likely buyers will propose, since it decides whether HST and land transfer tax come into the sale.
- 02Ask your accountant to run the Ontario surtax on your own gain and to check that your shares qualify for the exemption.
- 03List each employee with a start date, because the buyer inherits that service.
- 04If the company owns its building, get a current appraisal and decide whether the building goes with the business or stays with you under a lease.
- 05Show your lawyer any non-compete you expect to sign before the letter of intent.
A business with locations in more than one province meets each province’s rules for its staff and property there, set out in the guides for British Columbia and Quebec. Who to hire for an Ontario sale, and how to check each person’s registration, is in hiring a business broker in Ontario. To see what the business itself is worth first, the Quick AI valuation gives a range in a few minutes, before you give anyone your name.
The provincial tax and regulatory requirements, regions and buyers are set out on selling a business in Ontario.
Questions owners ask
- What is the tax rate on a capital gain when I sell my business in Ontario?
- At the top bracket in 2026, about 26.76 percent of the gain. Ontario’s 13.16 percent rate rises to about 20.53 percent with the surtax, and with the federal 33 percent the combined rate is about 53.53 percent, half of which applies to a capital gain. The lifetime capital gains exemption can shelter up to $1,275,000 of gain on qualifying shares first.
- Is HST charged when I sell my business assets in Ontario?
- HST at 13 percent applies to an asset sale unless buyer and seller elect on Form GST44. The election is open where the buyer acquires at least 90 percent of the property needed to carry on the business and both parties are registrants. A share sale is exempt from HST.
- Can an Ontario buyer make me sign a non-compete?
- Ontario voids employee non-competes signed from October 25, 2021, with two exceptions. One covers a sole proprietorship or partnership sold where the seller becomes the buyer’s employee immediately after the sale. The other covers executives such as a president or chief executive officer. A covenant given as seller in the purchase agreement is a separate question for your lawyer.
- Who pays land transfer tax when a business sale includes a building in Ontario?
- The buyer pays it, when the transfer is registered. On commercial land the rates run from 0.5 to 2.0 percent by bracket, which comes to $26,475 on a $1.5 million building. A building in Toronto may also carry the city’s own municipal land transfer tax.