What are the steps to buy a business in Ontario from start to finish?
Most purchases follow the same order: an offer or letter of intent, due diligence, a written purchase agreement, and closing. Your protections are mostly built through the terms you negotiate in those documents, so each stage matters.
Decide early whether you are buying shares or assets. In a share purchase, the corporation's WSIB account, including amounts owing, stays with the corporation. In an asset purchase, request a WSIB purchase certificate before the date of sale. If you acquire all or substantially all of the property needed to run the business, you and the seller can jointly elect on Form GST44 for no GST/HST to be payable, except where the seller is a registrant and you are not, and GST/HST still applies to services and leases. Ontario's Bulk Sales Act was repealed on March 22, 2017, but Retail Sales Tax Act s. 6 still applies to bulk sales by vendor-permit holders, and a buyer without the seller's duplicate certificate is liable for unpaid taxes.
Check the lease too: where it requires the landlord's consent to an assignment, that consent is deemed not to be unreasonably withheld unless the lease says otherwise. Seller's staff you hire keep ESA service unless hired over 13 weeks after the earlier of their last day or the sale.
Key takeaways
- Decide early between a share and an asset purchase, because a share purchase leaves the corporation's WSIB account and amounts owing with the corporation.
- In an asset purchase, request a WSIB purchase certificate before the sale date, because it is valid for 30 days from issue.
- Ontario's Bulk Sales Act was repealed on March 22, 2017, so older advice to follow bulk sales procedures is out of date.
- For a franchise, the disclosure document must arrive at least 14 days before you sign or pay unless an exception applies, such as a resale by an existing franchisee, and a late or deficient one can let you rescind within 60 days of receiving it.