Entity Setup
Entity Setup for Small Businesses: Using Employee Ownership Trusts Under Canada’s Bill C-30
Canada’s Bill C-30 introduces permanent capital gains exemptions for transfers to employee ownership trusts and co-ops—offering a compelling option for business succession and community-oriented ownership models.
By NomadicTax Research Team • 5-8 min read • July 15, 2026
## What Bill C-30 Brings for Entity Design
Canada-wide legislation recently enacted as Bill C-30 includes several measures that directly impact how small business owners may structure ownership and succeed a business. One major feature: making **permanent** a **capital gains exemption** for **qualifying business transfers to employee ownership trusts (EOTs)** and **worker co-operatives**. ([canada.ca](https://www.canada.ca/en/department-finance/news/2026/06/legislation-passes-to-implement-measures-from-the-spring-economic-update-2026.html?utm_source=openai))
### Why EOTs and Co-ops Now Attract More Attention
- **Capital Gains Tax Savings**: Where owners sell to an EOT or co-op, qualifying gains may be exempt from tax under certain conditions.
- **Succession Planning**: Allows business founders to transfer without looking only for outside buyers, keeping ownership local and mission-oriented.
- **Employee Engagement**: Ownership incentives foster loyalty, performance, and retention.
### Qualifying Conditions Under the New Rules
- The business must fit within the definitions in Canadian tax law for qualifying transfers.
- Employee ownership trust or co-operative must be established properly under legislation with trustees or governance provisions.
- Transfer eligible if continuous carrying on of business, fair market value considerations, and compliance with trust or co-op regulations.
## Examples & Practical Steps for Canadian Businesses
- **Example 1**: A family business sells shares to an EOT; original owners get proceeds, employees benefit via trust, and capital gains on sale may be partly or fully exempt.
- **Example 2**: A regional co-op acquisition by worker members; eligible for exemptions, but business will need to align with cooperative statutory structure.
### Action Plan for Small Business Owners
1. Engage a tax attorney or accountant to review whether your business qualifies under the new **capital gains exemption** rules in Bill C-30.
2. Set up governance for the EOT or co-op in compliance with federal and provincial laws—trust deeds, cooperative bylaws.
3. Appraise the business to determine fair market value in anticipation of transfer.
4. Consider timing: exemption relevant for transfers effective now that Bill C-30 is enacted (post Royal Assent). ([canada.ca](https://www.canada.ca/en/department-finance/news/2026/06/legislation-passes-to-implement-measures-from-the-spring-economic-update-2026.html?utm_source=openai))
**Key takeaway**: With Bill C-30’s changes, Canadian business owners have a renewed opportunity to build ownership models that benefit employees, families, and communities while gaining tax advantages.