Buying or Selling a Business
Buying or Selling a Business in Ontario
Barbarian Law® acts for buyers and sellers of private businesses, from the letter of intent to the closing funds. Share deal or asset deal, the structure is settled before the price is, and the work is billed at $350 an hour against a written estimate.
Two owners can sell businesses of the same value and walk away with very different amounts. The difference is usually the structure: whether it is a share or an asset sale, whether the shares qualify for the lifetime capital gains exemption, and whether anyone ran the numbers before the letter of intent was signed.
What We Do on a Deal
We work alongside your accountant from the first call, because structure, price and tax are one conversation.
For Sellers
- Qualify for the exemption. If your shares qualify as small business corporation shares, roughly the first $1.25 million of the gain per person (indexed to inflation from 2026) can be sheltered from capital gains tax, though alternative minimum tax can still apply. The tests look at the company on the day you sell and over the 24 months before, including that at least 90% of its assets are used in an active business carried on mainly in Canada at closing.
- Clean up the company first. Surplus cash and investments can fail the 90% test. Moving them out, by dividend or through a holding company, has to be planned months ahead with your accountant, not the week of the letter of intent.
- Use every exemption in the family. Each qualifying shareholder has their own exemption. A family trust or an estate freeze set up well before a sale can let a spouse or adult children claim theirs too, subject to the tax-on-split-income rules.
- Price the structure. If the buyer insists on assets, your company may pay tax on recaptured depreciation and on the goodwill before you can pay yourself. That cost belongs in the price.
- Limit what survives closing. Cap your indemnity, set a time limit on the representations you give, and tie any holdback or escrow to specific risks rather than the whole price.
- Secure money paid later. If part of the price comes through a vendor take-back or an earn-out, back it with a general security agreement and a guarantee, and define the earn-out with a worked example.
For Buyers
- Choose what you take on. An asset purchase lets you pick the assets and contracts you want and reset the tax cost of equipment and goodwill. A share purchase keeps contracts, licences and permits in place but brings the company’s history with it.
- Search before you sign. Corporate, PPSA, litigation, bankruptcy and execution searches, the minute book, material contracts, the lease, tax filings and licences.
- Avoid paying HST you don’t need to. On a purchase of all or substantially all of the assets needed to run a business, an HST-registered buyer and the seller can usually file a joint election under section 167 of the Excise Tax Act so that no HST is charged on the sale.
- Agree how the price is split. How the price is allocated between equipment, inventory and goodwill drives the tax for both sides, so settle the allocation in the agreement rather than leaving it to each side’s accountant after closing.
- Line up the financing early. Bank conditions, a vendor take-back from the seller or both usually decide the closing date, so the lender’s requirements belong in the timeline from the letter of intent.
- Check who you are buying from. A non-resident seller may trigger section 116 of the Income Tax Act, which calls for a clearance certificate or a holdback from the price. A non-Canadian buyer acquiring control of a Canadian business generally has to notify under the Investment Canada Act.
- Protect the price. Representations backed by an indemnity, a holdback or escrow sized to what diligence found, consents from the landlord and key customers, and a non-compete and transition period from the seller. We set up the new company you buy through.
Share Sale or Asset Sale
The choice decides who keeps the money and who keeps the risk. We walk through it in detail in share purchase vs. asset purchase.
Share sale
- The buyer takes the corporation, history included.
- The seller may use the lifetime capital gains exemption on qualifying shares.
- The buyer gets no step-up in the cost of the assets.
- Expect indemnities and a holdback.
Asset sale
- The buyer takes only the assets and contracts it chooses.
- The buyer gets a fresh cost base to depreciate.
- The seller’s corporation may face recapture and tax on the gain.
- Leases and key contracts usually need third-party consent.
How a Deal Moves
Ninety days from a signed letter of intent to closing is realistic for a private deal when both sides treat it as a project with a schedule. It is not guaranteed; financing, consents and records set the real pace.
Weeks 1–2: Structure
Share or asset settled, your accountant and any appraiser engaged the same week, and a diligence list issued for that structure.
Weeks 3–6: Diligence
Legal, financial and operational review running side by side, with written findings sorted by what they mean for the deal.
Weeks 7–12: Agreement and Closing
A purchase agreement drafted to what diligence found, consents and financing lined up, and documents signed in escrow so closing day is a release of funds.
Fees
$350 an hour, against a written estimate
Business purchases and sales are billed at $350 an hour plus HST. Before any work begins you get a written estimate with a scope and a range, and if the scope changes you hear about it before the hours are spent.
Disbursements such as corporate and PPSA searches, registrations, and title work where real property is involved are passed through at cost. A new numbered company is $1,000 + HST and a named company $1,200 + HST, including the government filing fee; independent legal advice is $500 + HST. No retainer. No deposit. Invoiced after the work is delivered. The full schedule is on our fees page. Tax outcomes depend on your circumstances and should be confirmed with your accountant.
Frequently Asked Questions
Should I sell shares or assets?
Sellers usually prefer a share sale, because qualifying shares can use the lifetime capital gains exemption, $1.25 million per person and indexed to inflation from 2026. Buyers usually prefer assets, for a clean start and a higher tax cost to depreciate. Which one wins is usually a price question, and it should be settled with your accountant before the letter of intent is signed.
How long does it take to buy or sell a business?
About 90 days from a signed letter of intent is realistic for a private deal with organized records and financing in place. Deals that take longer usually stall on lender conditions, landlord consents or missing records, not on the law.
What does it cost?
$350 an hour plus HST, against a written estimate you approve before any work begins, with disbursements passed through at cost. No retainer and no deposit. You are invoiced after the work is delivered.
Do I need a new corporation to buy a business?
Usually. Buying through a new corporation keeps the business separate from your other assets and can help with financing and tax planning. We incorporate it for $1,000 numbered or $1,200 named, plus HST, including the government filing fee.
What is an earn-out?
Part of the price paid later if the business hits agreed targets. It bridges a gap on value, but it is also the clause most likely to cause a dispute after closing, so the metric, the buyer’s control of the business and the calculation need to be written out with a worked example.
Settle the Structure Before the Price
If the letter of intent hasn’t been signed, that is the moment to call. Tell us whether you are buying or selling, the rough size of the deal and your timeline.
This page is for general informational purposes and does not constitute legal or tax advice. Reading it or contacting us does not create a lawyer-client relationship. Consult a lawyer about your own situation before relying on any of it.