Should I buy the assets or the shares when buying a business in Ontario?
Whether you should buy assets or shares depends on which risks and paperwork you are prepared to take on. In an asset purchase you buy selected property of the business, while in a share purchase you buy the corporation itself, and it keeps its WSIB account, including any amounts owing.
In an asset deal, you should request a WSIB purchase certificate before the sale date, and it is valid for 30 days. Without one, the WSIB may hold you liable for what the seller owed up to the date of sale. A share sale needs no certificate. Asset buyers may also need a new business number and their own payroll and GST/HST accounts. A search of the Personal Property Security Registration (PPSR) matters too, because buying a business's assets outside the ordinary course does not give you the protection that ordinary customers get against the seller's security interests.
Contracts, licences and leases may need the other party's agreement to move to you, and tax treatment differs between the two structures, so the better choice turns on the specific business, its contracts and your tax position. A lawyer and accountant can confirm before you sign.
Key takeaways
- In a share purchase the corporation's WSIB account, including any amounts owing, stays with the corporation, and no purchase certificate is required.
- In an asset purchase, the WSIB says to request a purchase certificate before the sale date, and the certificate is valid for 30 days.
- Asset buyers may need a new business number and their own payroll and GST/HST accounts, while buying shares is generally not subject to GST/HST.
- Search the PPSR before an asset purchase, because buying a business's assets outside the ordinary course does not carry the ordinary-course protection against the seller's security interests.