Work backwards from the sale
Consolidators are active buyers of GTA practices, and the offer usually arrives before the owner planned to sell. Whether it is a consolidator or an associate, the tax outcome turns on one thing: do the shares qualify for the lifetime capital gains exemption, now $1.25 million and indexed again from 2026, at the moment of sale?
Qualification means passing the QSBC tests: at sale, 90% or more of the corporation's assets by value must be used in the active practice; throughout the 24 months before, more than 50% must have been; and the shares must have been held for those 24 months. A practice that can say yes on short notice negotiates from strength. One that cannot is choosing between a worse price and a worse tax bill.
Purity is housekeeping, not a year-end fix
Retained profits drift. A few good years leave GICs, a portfolio, maybe a loan to a family member sitting inside the DPC, and every dollar of it counts against the 90% and 50% tests. The hard part is that the 50%-throughout-24-months test cannot be repaired retroactively; by the time an offer exists, the look-back period is already written.
Professional corporations also lose the standard cleanup tool: Ontario's rules do not allow a holding company to own DPC shares, so passive assets cannot be dividended sideways to a holdco the way an ordinary CCPC would. The levers that remain are simpler and slower, which is exactly why they belong in the annual plan:
- Taxable dividends or bonuses that move surplus out at known rates.
- RRSP-generating salary, or an individual pension plan for older owners wanting bigger deductible room.
- Paying down practice debt and funding equipment and leaseholds, which are active assets.
Keeping the portfolio lean has a second payoff: past $50,000 a year of passive investment income, the federal small business limit starts to shrink, so a fat internal portfolio costs twice.
Family shares earn their keep at the exit
TOSI taxes most dividends paid to a dentist's family shareholders at the top personal rate, which is why family non-voting shares look pointless during the owning years. They are not. Taxable capital gains on QSBC shares are excluded from TOSI, so a spouse or adult child who has personally held non-voting shares through the 24-month window can claim their own exemption on a sale. Two qualifying shareholders can shelter up to $2.5 million of gain between them.
The conditions are unforgiving: the shares must be issued early, at a supportable value, and held directly rather than through a trust (minors' shares held in trust are the narrow exception). Who may hold DPC shares at all is covered on our incorporation page; here the point is timing. Shares issued the year an offer arrives multiply nothing.
Share sale or asset sale
Buyers and sellers pull in opposite directions, and the spread between the two outcomes is the negotiation:
| Share sale | Asset sale | |
|---|---|---|
| What changes hands | The DPC's shares | Equipment, leaseholds, patient records, goodwill |
| Seller's tax result | Capital gain to shareholders; LCGE can shelter up to $1.25M per qualifying holder | Corporation taxed on recapture and goodwill gains, then tax again as cash comes out |
| Buyer's instinct | Discount the price for inherited history | Pay more for fresh CCA on stepped-up assets |
| Where planning lives | Purity kept for 24+ months before | Price allocation and the timing of extraction |
Hybrid structures that split the difference exist, and they lean on Corporate Restructuring work done well before closing.
The years in between
Exit planning does not replace annual planning; it frames it. Each year we reset the salary-dividend mix against RRSP room, CPP, the passive-income position and what the household actually needs, and we decide where this year's surplus should sit so it never poisons the QSBC tests. That standing conversation is our Tax Planning & Advisory service, and it is priced as advice, not as an annexe to the T2.
One more restriction shapes the endgame: voting DPC shares can only ever sit with a licensed dentist, so wills and powers of attorney need professional-corporation clauses drafted with that in mind. Our Estate Planning work covers that succession side before it is urgent.
