Buying or Selling a Business in Ontario (M&A)
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. For a business under $1 million, an agreement review is $1,500 + HST and the full deal is from $5,000 + HST; larger deals are 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 may qualify for the capital gains deduction in section 110.6 of the Income Tax Act, and whether anyone ran the numbers with an accountant 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. Tax points below are general information, not tax advice; your accountant confirms how they apply to you.
For Sellers
- Ask about the capital gains deduction early. Section 110.6 of the Income Tax Act lets individuals reduce the taxable gain on qualified small business corporation shares. Whether yours qualify is a question for your accountant months before a sale, not the week of the letter of intent.
- Price the structure. If the buyer insists on assets, your company may owe tax on recaptured depreciation (Income Tax Act, s. 13(1)) and on the gain before the money reaches you. 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. Section 68 of the Income Tax Act lets the CRA reallocate a price split that isn’t reasonable, 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 be able to claim the capital gains deduction (ITA s. 110.6) 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.
M&A for Private Businesses
M&A is the industry term for buying and selling companies. Owner-managed deals in Ontario usually turn on the same few issues, and most of them are settled before anyone drafts the purchase agreement.
Agree the Terms First
Price, structure, exclusivity, conditions and a target closing date, in a letter of intent that says which parts bind and which don’t. A lot of later disputes start with something left vague here.
How the Price Gets Paid
Cash on closing, a vendor take-back (VTB) where the seller finances part of the price, a holdback or escrow, an earn-out, and a working-capital adjustment that compares what the business holds on closing day with an agreed target. Each term moves money and risk between the two sides.
What the Buyer Checks
The minute book and corporate searches, the lease, material contracts, employees, licences and tax filings. Each finding lands somewhere: in the price, in an indemnity or holdback, or on a list of things to fix before closing.
Keeping the Business Together
Key employees, the seller’s non-compete and non-solicit, a transition period, and consents from the landlord, lenders and any customer whose contract requires one on a sale.
Hospitality Purchases and Sales
Restaurants, bars, venues and franchises, with the AGCO liquor licence transfer and the lease assignment built into the closing timeline. For licensing and leases outside a sale, see our hospitality services.
Closing and After
Funds, payouts and security registrations confirmed, the share transfers or bill of sale delivered, and a dated list of what happens after closing: the post-closing adjustment, holdback releases and any filings.
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
From $1,500 + HST, in writing first
For a business under $1 million, an agreement review is $1,500 + HST and the full purchase or sale, asset or share, with the agreement, the due diligence review and the closing, is from $5,000 + HST. Deals over $1 million, or with real estate or financing, 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 and a named company $1,250 with the NUANS search, including the $300 government filing fee, plus HST on the balance and a $125 Dye & Durham filing fee without HST; 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 may be eligible for the capital gains deduction in section 110.6 of the Income Tax Act. 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?
Under $1 million, an agreement review is $1,500 + HST and the full deal, asset or share, is from $5,000 + HST. Over $1 million, or with real estate or financing, it is $350 an hour plus HST against a written estimate you approve before any work begins. Disbursements pass 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 $1,250 named with the NUANS search, including the $300 government filing fee, plus HST on the balance and a $125 Dye & Durham filing fee without HST.
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.