Do I inherit liabilities if I buy only the assets of a business in British Columbia?
This answer covers the law of British Columbia.
Not automatically, but some obligations follow the business even when you buy only its assets. Whether the seller's other debts reach you depends on the deal and the facts. Certain rules still attach to the sale itself, and they are worth checking before you sign.
Employees are the main example. If all or part of a business is disposed of, an employee's employment is deemed continuous and uninterrupted by the sale. The buyer takes on the employer role, must honour the employee's length of service, and pays outstanding wages, including wages due before the sale. Exceptions apply if an employee declines your offer on unchanged conditions, or if the sale is a bankruptcy trustee's sale.
Tax can also follow you. A buyer who does not obtain a PST clearance certificate is liable for any outstanding amount owed by the collector. Transfers to a spouse, a person under 18 or someone not dealing at arm's length can make both sides liable for the transferor's tax, up to the excess of fair market value over what was paid. Source deductions, builders liens and environmental issues depend on the facts, so ask a lawyer to confirm.
Key takeaways
- In an asset purchase you generally pick the assets you take, but if employment continues you step in as the employer and must honour each employee's length of service.
- Outstanding wages, including wages due before the sale, and accrued vacation pay pass to the buyer when employment continues.
- Get a PST clearance certificate, which the purchaser can apply for online or on form FIN 447 with the collector's consent, because without one you are liable for amounts the collector owes.
- Transfers to a spouse or common-law partner can create shared tax liability, although s. 160(4) has special rules after a relationship breakdown.