Summary: Selling a business turns years of work into a single number, and the pressure to invest it quickly can arrive with the wire transfer. The better first move is to decide what the money needs to do: set aside the tax, keep enough within reach, give the rest a purpose, and only then build the portfolio.
The short answer: do not rush to invest it. Decide first what the money needs to do, and in what order, and let the portfolio be the last decision rather than the first.
For years, the business was the plan. It paid the salary, absorbed your attention and gave every week a shape, and now it has been converted into a single number sitting in an account, which is a very different thing to look at on a Tuesday morning. A figure that felt abstract while you were building toward it feels heavier once it is the only one left, and the pressure to do something with it, quickly and correctly, can arrive the same week as the wire transfer.
That pressure is understandable, but it points at the wrong first question. The question is rarely which investments to buy, because that answer depends on several decisions that have not been made yet: how much of this money is already spoken for, how much you need close at hand, and what the rest is actually meant to do for you and your family.
Answer those in order, and the investment decisions become far simpler, because by then the portfolio has a job description rather than a vague instruction to grow.
What should I do first with the money from selling my business?
Work through four decisions, in this order:
- Set aside what you will owe in tax.
- Decide how much to keep within reach.
- Decide what the rest of the money is for.
- Build the portfolio around those answers.
The order matters because each step narrows the next one, so that by the time you reach the portfolio, most of the hard choices have already been made calmly and on paper, rather than under pressure and in the market.
How much of the sale proceeds should I set aside for tax?
The first job is to separate the money that is yours from the money that only looks like it. A sale can create a tax bill that is not due on the day of closing, and because the full amount lands in your account before that bill arrives, it is easy to treat the whole figure as investable.
How much belongs to the tax authorities depends on how the deal was structured. A share sale and an asset sale are taxed differently, whether you can claim the Lifetime Capital Gains Exemption depends on the shares and how long and how they were held, and proceeds paid into a holding company follow a different path from proceeds paid to you personally. Your accountant can estimate the figure, and that estimate is worth having before anything else moves.
Money that is already spoken for is not part of your portfolio. It is a liability that happens to be sitting in your account.
How much cash should I keep after selling my business?
The next decision is how much to keep somewhere you can reach it without selling anything. There is no universal figure, because the right amount depends on what you spend in a typical year, whether there is a gap between the end of your salary and the start of any new income, and what large, known costs are coming, such as a home renovation, a child's education or a commitment to family.
There is also a less measurable factor, which is how much cash you need to stop checking the market every morning. For some founders that number is modest, while for others a larger reserve is what makes the rest of the plan feel livable, and both can be reasonable.
The useful distinction is between cash held for a reason and cash held because no decision has been made. The first is part of a plan. The second is a decision being postponed, and it tends to stay postponed longer than anyone intended.
What is the rest of the money actually for?
Once tax and near-term needs are set aside, the remainder needs a purpose, and usually it has several. Part of it may need to replace the income the business used to provide, part may be earmarked for children or grandchildren, part may fund a next venture or a philanthropic commitment, and part may simply be meant to outlast you.
Each of those jobs has its own time horizon and its own tolerance for a bad year, which is why it helps to name them separately rather than treating the proceeds as one pool. Money that has to pay for next year's living costs is doing a very different job from money that will not be touched for twenty years, even if both sit in the same account.
A portfolio without a job tends to be judged against the market. A portfolio with a job is judged against your life, which is the comparison that matters.
When should I start building the investment portfolio?
Only after the first three decisions are made, because the portfolio is the answer to them rather than the starting point.
This is also the point at which the structure of the investments, and where they are held (personally, in a holding company, in registered accounts or in a trust), starts to matter as much as what is held, because the same investment can produce quite different after-tax results depending on the account it sits in.
Buying investments is the easy part. Knowing what they are for is the part that makes them hold up when markets do not cooperate.
Should I wait before investing the money from the sale?
A pause can be the right call, provided it has a purpose and an end date. Taking a few weeks or months to settle the tax position, define the reserve and decide what the money is for is not indecision, because it is the work that makes every later decision easier, while a pause with no agenda tends to become a decision made by default. Whether to then invest all at once or in stages is a separate trade-off, and one worth working through with your advisor.
The distinction worth holding onto is between a pause with a plan and a pause without one.
What makes this more complicated?
The four-step framework holds for most sales, but several common situations change the details, and each one connects the investment decisions to tax and legal decisions that cannot sensibly be made in isolation.
The proceeds are in a holding company. Investment income inside a corporation is taxed differently from personal income, and how the money eventually comes out has its own consequences, so where the money sits and what it is invested in become one decision rather than two.
Part of the price arrives later. An earnout, holdback or vendor take-back note means some of the proceeds are uncertain or delayed, which affects both the reserve you hold and how much risk the rest can carry.
A family trust owns some of the shares. The proceeds may be divided among beneficiaries in ways that carry tax, legal and family implications, and the trust deed shapes what can be done with the money.
There is a cross-border element. US citizenship, US assets or significant time spent outside Canada can change how the money is invested and reported.
In each case, the investment plan, the tax plan and the legal structure depend on one another. When your accountant, your lawyer and your portfolio manager work from the same picture, the decisions tend to fit together; when they work separately, each can be sensible on its own and still cost you in combination.
Where Westmount starts
Westmount Wealth Management is a Canadian portfolio manager with offices in Vancouver, Qualicum Beach and Toronto. It is registered in BC, Alberta, and Ontario and provides discretionary portfolio management to founders during and after a business sale, as well as to incorporated and asset-rich retirees.
The first conversation is a discovery meeting rather than a pitch. Its purpose is not to move your money; it is to understand what the sale means for you, what is already spoken for, what the remaining capital needs to do, and which of the complications above apply, so that any recommendation that follows is built around your situation and coordinated with your accountant and lawyer.
Frequently Asked Questions
Do I need to update my will after selling my business?
It is worth reviewing, because a sale changes what you own and how you own it. A will written around shares in an operating company may not reflect cash, an investment portfolio or a holding company, and the same is true of powers of attorney and beneficiary designations. An estate lawyer can confirm what needs to change, ideally working from the same picture as your accountant and portfolio manager.
How much tax will I pay when I sell my business in BC?
It depends on whether you sold shares or assets, whether the Lifetime Capital Gains Exemption applies to your shares, whether a family trust or holding company was involved and how the payments are timed. Because the answer turns on the specific deal, your accountant is the right person to estimate it, ideally before the proceeds are invested.
Should I use the sale proceeds to pay off my mortgage?
It can make sense for some people and not for others. The answer depends on the interest rate, the after-tax return you might reasonably expect elsewhere, how much liquidity you want to keep and the peace of mind that comes from owning your home outright. It is a decision worth working through with your advisor alongside the rest of the plan.
What happens if the proceeds from my sale are paid into my holding company?
The money is then owned by the corporation, and investment income earned inside it is taxed under corporate rules that differ from personal ones. How and when you draw money out, whether as salary, dividends or other distributions, carries its own tax consequences, so the holding company decision and the investment decision are best made together with your accountant.
What should I look for in a wealth manager after selling my business?
Look for a firm that asks what the money needs to do before it talks about products, explains clearly how it is paid and is comfortable working alongside your accountant and lawyer. Experience with business sales, holding companies and post-sale planning matters, as does confirming the firm's registration with the relevant securities regulator.
This information has been prepared by Westmount Wealth Management Inc. Westmount Wealth Management Inc. is registered as a Portfolio Manager in British Columbia, Alberta, and Ontario. Westmount Wealth Planning Inc. is a subsidiary of Westmount Wealth Management Inc.
This material is distributed for informational purposes only and is not intended to provide personalized legal, accounting, tax, or specific investment advice. Please speak to a Westmount Wealth Advisor regarding your unique situation.
