Selling shares of an active business to family members in Canada is a common way to raise capital, bring in new talent, or transfer ownership. It is important to understand the legal and tax implications of such a transaction, especially when dealing with family members. Here are some steps to follow when selling shares of an active business to family members in Canada:

  1. Determine the value of the business: Hire an appraiser or accountant to determine the fair market value of the business. This will help you set the price for the shares you are selling.
  2. Draft a shareholder agreement: Draft a shareholder agreement that outlines the rights and obligations of the shareholders, including the distribution of dividends, the transfer of shares, and the election of directors.
  3. Consider tax implications: Consider the tax implications of the sale, including capital gains tax, income tax, and gift tax. Consult a tax advisor to determine the most tax-efficient way to structure the transaction.
  4. Seek legal advice: Seek legal advice to ensure that the transaction complies with Canadian law, including securities law and corporate law.
  5. Register the transfer of shares: Register the transfer of shares with the relevant government agency, such as the Canadian Securities Administrators or the Canadian Revenue Agency.
  6. Update the corporate records: Update the corporate records to reflect the change in ownership, including the register of directors, the register of shareholders, and the articles of incorporation.
  7. Monitor the business: Monitor the business to ensure that the family members adhere to the terms of the shareholder agreement and that the business continues to operate in a manner consistent with the interests of all shareholders.

Selling shares of an active business to family members can be a complex process, but it can also be a great way to raise capital, bring in new talent, or transfer ownership. Seek the advice of professionals, such as accountants, lawyers, and tax advisors, to ensure a smooth and successful transaction.