How to Keep More Money When Selling Your Business

1. How to Keep More Money When Selling Your Business Selling a business is one of the most important financial decisions you will ever make. You have invested years of hard work, sweat, and money into building it. Naturally, you want to keep as much profit as possible when you sell. TheLifetime Capital Gains Exemption (LCGE)is a tool that can help—but only if you understand it, prepare in advance, and plan carefully. Done right, it can save you a significant amount in taxes. Why Selling a Business Is More Complicated Than It Seems Many business owners assume selling a company is straightforward: you sell, get paid, and move on. The truth is that taxes can take a surprisingly large chunk of your profit if you aren’t careful. This is where the Lifetime Capital Gains Exemption comes into play—it allows you to reduce or even eliminate taxes on a portion of your gains. But eligibility rules are strict, and mistakes can be costly. Planning for a sale isn’t just about paperwork. It’s about understanding your company, knowing the rules, and timing the sale correctly. Without proper preparation, even experienced business owners can leave thousands of dollars on the table. Common Challenges When Selling a Business Selling your business comes with several challenges: ● Eligibility problems: Not all companies or share types qualify for the LCGE. ● Incomplete documentation: Missing invoices, contracts, or financial statements can make claiming the exemption difficult. ● Timing mistakes: Selling too soon or after restructuring the business can reduce your exemption. ● Assuming the exemption covers everything: Many business owners mistakenly think the LCGE applies to all profits.

2. Being aware of these pitfalls ahead of time is crucial. Early planning allows you to avoid mistakes and maximize the benefit. Step-by-Step Guide to Maximizing Your Lifetime Capital Gains Exemption Here’s how you can approach your sale strategically: Steps to Maximize Your Lifetime Capital Gains Exemption The Lifetime Capital Gains Exemption (LCGE) can offer major tax savings when you sell your business shares. But to qualify, you must keep your company records, structure, and assets in proper shape. Many business owners accidentally disqualify themselves simply because they were unaware of the requirements. Here are simple, practical steps to help keep your business eligible and ready for a future sale. 1. Review the Balance Sheet Start by understanding what your firm owns. Look for assets that do not support daily business activities—such as unused bank accounts, old equipment, or properties that are not involved in operations. Cleaning up these items strengthens your balance sheet and supports your LCGE claim.

3. 2. Track Your Share History Keep a clear record of when and how you received each share of your company. Buyers or tax authorities may request this information during a review. Storing all documents in one place makes the process easier and avoids last-minute stress. 3. Check the Company Structure Some business owners operate multiple companies or use a holding structure. These setups can affect LCGE qualification. A review with a tax expert may highlight changes needed to keep you compliant and eligible. 4. Watch How Money Flows How you pay yourself and how money moves between shareholders and the company can influence your firm’s qualification. It’s helpful to review this with an advisor to make sure your payment methods support active business operations and do not weaken your LCGE claim. 5. Remove Idle Assets Idle assets reduce the percentage of active business use. You can shift unused items to another entity or allocate them toward future business expenses. This “purification step” helps clean up your balance sheet and keeps your company aligned with LCGE rules. 6. Keep Documents Updated Before a sale, buyers expect clean, updated financial records. Well-maintained books show that your business is healthy and make the LCGE claim easier to support. Regular updates also prevent surprises during due diligence. Real-Life Example

4. Consider Sarah, who owns a small technology company. She plans to sell for $1.5 million. Without LCGE planning, she might pay taxes on the full amount, losing over $400,000 in taxes. With proper planning: ● $913,630 of her gain is tax-free ● Only $586,370 is taxable By understanding and applying the LCGE rules, Sarah keeps more of the money she worked so hard to earn. Common Mistakes to Avoid Even with LCGE knowledge, mistakes happen. Avoid: ● Failing to track shareholding properly: Ensure you know who owned what and when. ● Ignoring minor corporate changes: Even small restructuring may affect eligibility. ● Missing documentation: Keep invoices, agreements, and contracts organized. ● Neglecting timing: Rushing a sale without planning can reduce benefits. Tips for Smooth Bookkeeping Before a Sale ● Organize your financial records: Make sure every invoice and expense is recorded. ● Separate personal and business accounts: This avoids confusion and strengthens your exemption claim. ● Track all assets: Record dates and values clearly. ● Document business activity: Even small transactions should be recorded to prove active business use. Clean, clear records reduce stress and give confidence during the sale process. Key Takeaways ● The LCGE can save you a significant amount in taxes if used correctly.

5. ● Proper planning and record-keeping are essential to eligibility. ● Timing your sale strategically can maximize your exemption. ● Professional guidance ensures you don’t make costly mistakes. ● Even minor details, like maintaining clear invoices and contracts, can impact the outcome. Conclusion Selling your business is a major milestone in life. The Lifetime Capital Gains Exemption exists to reward your hard work—but only if you handle it carefully. Plan early, keep clean records, and work with a professional advisor. Doing so can reduce stress, protect your profits, and allow you to move forward confidently. The key is preparation: understand your business, maintain clear documentation, and make strategic decisions. With the right support, the exemption can help you keep more of your money and achieve the financial freedom you’ve earned through years of dedication. Meru Accounting can guide you through each step—cleaning up your books, reviewing your structure, and ensuring your financial records stay in strong shape. With a team that understands taxation and business compliance, Meru Accounting helps you prepare properly so you can make the most of your Lifetime Capital Gains Exemption.