Share Purchase vs Asset Purchase in Ontario: Which Deal Is Better?

Before anyone drafts a contract, buyers and sellers of an Ontario business have to decide how the deal is built. In a share purchase the buyer acquires the corporation's shares. In an asset purchase the buyer acquires selected assets and the seller keeps the corporation.

Each structure shifts risk and tax between the two sides. This article compares them on the issues people ask about most, so you can have a more useful conversation with your lawyer and accountant.

The basic difference

In a share deal, the corporation does not change. It keeps its contracts, employees, licences and any past liabilities, whether the buyer knows about them or not. In an asset deal, the buyer chooses what to take, so it can usually leave out debts and obligations it does not agree to assume, but must transfer each asset properly.

Because of this, buyers often prefer assets for the lower inherited risk, while sellers often prefer shares for the tax result and a cleaner exit. Where the parties land is a negotiation, and the price may move depending on the structure.

Side-by-side comparison

Tax and filing consequences in more detail

For a share sale, qualifying shares must meet tests: no ownership by anyone other than the individual or a related person or partnership throughout the 24 months before the sale, a Canadian-controlled private corporation, and more than 50% of asset value in qualifying active-business assets during that period. For dispositions on or after June 25, 2024, the exemption is $1,250,000 and the maximum deduction is $625,000, and the limit is indexed to inflation. Check the current figure for your closing date.

For an asset sale, the GST/HST election is only available if the buyer acquires all or substantially all of the property needed to carry on the business, which the CRA generally treats as 90% or more. It is not available where the seller is a registrant and the buyer is not. Even with the election, GST/HST still applies to some items, including taxable services the seller will render and taxable property supplied by lease or licence.

If land is part of the asset deal, remember Ontario land transfer tax, which rises through four tiers up to 2.0% above $400,000 for most land. How a share sale of a corporation that owns land is treated should be confirmed with a lawyer.

Employees, family deals and size

In an asset deal, the purchaser is not obliged to hire the seller's employees. If it does, employment is deemed not terminated or severed for ESA purposes and the seller's service counts. The employee cannot waive this continuity, even if hired on lower pay or new terms. It does not apply if the purchaser hires the employee more than 13 weeks after the earlier of the last day with the seller or the sale date.

• Family or related-company deals can create joint liability for tax under section 160 where property is transferred for less than its fair market value.
• Large deals may need Competition Act notification above a $93 million transaction-size threshold and a $400 million party-size threshold for 2026; typical small-business deals fall well below.
• Moving assets into a corporation before a sale may use a section 85 rollover election.

What to do next

• Ask the seller's accountant whether the shares are likely to qualify for the capital gains deduction.
• Ask the buyer's advisers how much historic liability they are willing to accept and how it would be protected.
• List every contract, lease and licence, and check which need consent under either structure.
• Estimate the tax cost of both structures, including GST/HST and land transfer tax, and compare the net result.
• Review employee arrangements and the 13-week window if an asset deal is chosen.
• Have a lawyer confirm the structure before a letter of intent or agreement is signed.

The best structure is the one that suits the facts of your deal, and that is something your advisers can work out with you.

Frequently asked questions