Do I Need a Lawyer to Buy a Business in Saskatchewan?

If you are buying a small business, it is tempting to treat it like any other purchase: agree on a price, shake hands and take the keys. In reality a business sale is a bundle of legal and tax steps, and several have deadlines.

This article does not claim that one specific law forces every buyer to hire a lawyer. It explains what the work involves in Saskatchewan so you can judge how much of it you are comfortable handling, and where mistakes cost the most.

This article covers the law of Saskatchewan.

What a lawyer does in a business purchase

A lawyer typically reviews or drafts the offer and the purchase agreement, investigates the business, deals with registrations and tax elections, holds money in trust, and arranges the closing. The aim is to make sure you receive what you paid for, free of surprises.

• Structuring the deal as an asset or share purchase.
• Checking for liens and other claims on what you are buying.
• Drafting warranties, indemnities and conditions.
• Coordinating with your accountant on tax elections.
• Preparing the closing documents and handling payment.

Steps that involve paperwork or deadlines

Many of these steps depend on how the deal is structured. The table shows common ones.

Each of these has its own rules and exceptions, which is where self-managed purchases tend to go wrong.

Where buyers get caught without help

The GST/HST election has conditions. The seller must be supplying a business or part of one, and the buyer must acquire all or substantially all of the property reasonably necessary to carry on the business. CRA treats that as generally 90% or more. The election is unavailable if the seller is a GST/HST registrant and the buyer is not, and it does not apply to a sale of only individual assets. Even with the election, GST/HST still applies to certain items, such as taxable leases or licences and real property sold to a non-registrant.

Timing matters too. A registrant buyer must file the election by the due date of its GST/HST return for the first reporting period in which tax would otherwise have become payable, though CRA may allow a later date on application.

On PST, if the seller did not collect the tax, the buyer must calculate it and remit it to the Ministry of Finance. For asset purchases made after the business has started operating, the PST is reported on the Net Tax on Consumption line of the regular return.

Liens are another risk. A buyer taking goods may take them subject to a registered security interest, so the buyer should require discharges or payout from the price at closing.

Situations that add complexity

• Non-resident seller: a buyer of taxable Canadian property from a non-resident without a CRA certificate may become liable for the vendor's tax and may withhold 25% (50% on certain property) of the proceeds. This matters only when the seller is a non-resident.
• Franchise: franchisors must give a disclosure document at least 14 days before any agreement is signed or payment made.
• Employees: if staff keep working there after a sale, their service is maintained for notice purposes.
• Large or foreign deals: Competition Act pre-merger notice is generally required only if the target's Canadian assets or revenue exceed $93 million and the parties' combined Canadian assets or related revenue exceed $400 million, and most small Saskatchewan deals fall well below that. Foreign buyers should ask about the Investment Canada Act.

What to do next

• Decide whether you are buying assets or shares, and ask an accountant how each affects tax.
• List every registration and filing the deal will need, with dates.
• Search the lien registry before you pay anything.
• Have the offer reviewed by a lawyer before you sign it, so you understand exactly what you are agreeing to.
• Book a lawyer early enough to cover tax deadlines and the closing.

Frequently asked questions