What are the steps to buy an existing business in Nova Scotia?
This answer covers the law of Nova Scotia.
You generally move through a confidentiality agreement, a letter of intent, due diligence, a purchase agreement, financing and closing, and the biggest choice is whether you buy the business's assets or the company's shares. In an asset purchase you allocate the price among the assets, and that allocation sets your cost base for each one. In a share purchase the company's own assets keep their cost base and your cost relates to the shares only.
During due diligence, you can search the Nova Scotia Personal Property Registry for liens on inventory and vehicles, but it does not show liens on land. Tax differs too: a share purchase is generally not subject to GST/HST, while an asset purchase can be unless an exemption or election applies. A joint election on Form GST44 is possible where you acquire all or substantially all of the property needed to run the business.
After closing, the paperwork differs as well: on a share purchase you file director and officer changes with the Registry of Joint Stock Companies, while in an asset purchase your own entity registers its business name and sets up its CRA accounts. Contracts, leases, employees and financing depend on the facts and are worth reviewing with a lawyer.
Key takeaways
- Decide early whether you are buying assets or shares, because that choice changes your cost base, your GST/HST position and your closing paperwork.
- Due diligence can include a Personal Property Registry search for liens on items like inventory and vehicles, but that registry does not show liens on land.
- A joint GST/HST election on Form GST44 may be available in an asset purchase if you acquire all or substantially all of the property needed to run the business, but not if you buy only a few assets.
- Buying from a relative, or buying as a non-Canadian, can bring extra tax liability or notification rules, so get advice before you sign.