When Claire, the owner of a thriving manufacturing company, decided it was time to sell the business she’d spent decades building, she became concerned about the tax implications. A friend mentioned capital gains exemptions—a way to potentially save hundreds of thousands in taxes—but Claire had no idea how to maximize capital gains exemptions. That’s when she reached out to WiseInvest™.

The Challenge

1. Ineligible Corporate Structure
   Claire’s business, as currently structured, didn’t fully qualify as a Qualified Small Business Corporation (QSBC). Because she hadn’t met certain requirements, she risked losing her Lifetime Capital Gains Exemption (LCGE) entirely.
2. Purifying Assets
   The company’s balance sheet contained non-active assets (like surplus cash and market investments) that disqualified her from the full tax break. She needed to remove or restructure these assets to meet QSBC criteria.
3. Timing Concerns
   Claire initially hoped to sell the business within 6 months to the potential buyer. However, since there is a need for share restructure, she wouldn’t meet the two-year QSBC holding period if she sold too soon.

The WiseInvest™ Recommendation

After reviewing her situation, WiseInvest™ advised Claire to pause her sale and embark on a restructuring plan to secure the LCGE:

1. QSBC Compliance
   We detailed the steps to shift her non-active assets and ensure her company meets the QSBC requirements, which typically involve holding qualified shares for at least two years.
2. Asset Purification
   By removing or reallocating surplus funds and unrelated investments, Claire could “purify” her corporate balance sheet, making the business eligible for the capital gains exemption.
3. Family Involvement
   We discussed how assigning shares to a family trust & naming family members as beneficiaries could enhance the LCGE benefits, a strategy which multiply the capital gain exemption through family trust.  

The Results

• Delayed Sale, Future Savings: Although Claire postponed selling by two years, she positioned herself to preserve hundreds of thousands in potential tax savings.
• Clear Roadmap: With a step-by-step plan in place, Claire knows exactly what she needs to do to qualify for the LCGE and minimize her tax bill.
• Peace of Mind: Having professional guidance allowed her to maintain control of the process and focus on maximizing her business’s value before the sale.

If you’re contemplating selling a business but worry you’re not positioned for capital gains exemptions, contact WiseInvest™ today. We’ll guide you through the restructuring timeline and tax-saving strategies needed to ensure you keep as much of your hard-earned wealth as possible.

*Note: For privacy reasons, the names and nature of our clients’ businesses have been changed.