- Buyers often treat the LOI as a formality because most of its commercial terms — price, structure, timeline — are non-binding.
- Whether the deal is a share purchase or an asset purchase changes what you're actually exposed to.
- Two areas here catch buyers by surprise.
It's easy to assume a business purchase is mostly a financial decision — negotiate a fair price, confirm the numbers, sign. The legal side can feel like paperwork you'll deal with once the "real" negotiation is done.
That assumption is exactly how buyers end up inheriting problems they never agreed to take on. A broker's standard template, or a purchase agreement drafted solely by the seller's lawyer, is not built to protect you. Here's the specific risk a lawyer catches at each point in the deal — and why "before you sign anything" means the letter of intent, not just the final agreement.
The Letter of Intent Sets the Terms You'll Live With
Buyers often treat the LOI as a formality because most of its commercial terms — price, structure, timeline — are non-binding. But a handful of clauses, like confidentiality and exclusivity, are typically drafted to bind you the moment you sign, regardless of what happens with the rest of the deal. Signing an LOI without a lawyer reviewing it means you may already be locked into an exclusivity period or confidentiality obligation before you've had a single clause explained to you.
What a Lawyer Checks in the Corporate Structure
Whether the deal is a share purchase or an asset purchase changes what you're actually exposed to. In a share purchase, the corporation's full history — known and unknown liabilities — comes with the shares unless the purchase agreement's representations, warranties, and indemnities specifically address it. A lawyer reviews the corporate records, confirms the corporation's standing, and negotiates the protections that stand between you and a liability nobody told you about. In an asset purchase, a lawyer makes sure the assets and liabilities you're actually agreeing to take on are precisely defined — vague or informal asset lists are how buyers end up disputing what was actually included.
Employees and Non-Competes
Two areas here catch buyers by surprise. First, under the Employment Standards Act, 2000, where a business is sold as a going concern and the purchaser hires the seller's employees, those employees' prior service can carry over for statutory entitlement purposes — a purchaser doesn't automatically get a "clean slate" just because the employer entity changed. Second, since a 2021 change to the ESA, general employee non-compete agreements are void, with only narrow exceptions — one for a seller who becomes an employee of the purchaser as part of the sale, and one for defined executive roles. A buyer who assumes a departing owner or manager can simply be locked into a standard non-compete may find that agreement unenforceable without the right structure in place.
Leases, Licences, and Other Consents You Can't Assume
Assigning a commercial lease to you generally requires landlord consent, and while the Commercial Tenancies Act generally prevents a landlord from unreasonably withholding that consent where the lease restricts assignment, the lease's own wording still controls first. A lawyer identifies every consent your deal actually needs — lease, lender, licence, and (where relevant) franchisor — well before closing, rather than discovering a missing consent at the closing table.
Protecting You After Closing
A purchase agreement's representations, warranties, and indemnities are what stand behind you if something the seller told you turns out to be wrong after closing. A lawyer negotiates these terms, along with mechanisms like a holdback or escrow that secures your ability to actually collect on an indemnity claim rather than chasing a seller who has already spent the proceeds.
What Happens If You Skip Legal Review
Skipping legal review doesn't make these risks disappear — it just means nobody is specifically working to protect you against them. Since Ontario has no statutory bulk-sales creditor-notice regime today, an asset-purchase buyer's only real protection against a seller's undisclosed creditors comes from due diligence, representations and warranties, and indemnities — all things a lawyer builds into the deal, not things that happen automatically.
Frequently asked questions
Can't I just use the broker's standard purchase agreement?
A broker's template is generally a starting point, not a finished document tailored to your deal. It typically won't reflect the specific risks found in your due diligence or protect you the way a negotiated set of representations, warranties, and indemnities would.
Isn't the seller's lawyer looking out for the deal generally, so I don't need my own?
No — the seller's lawyer represents the seller's interests, which are often directly opposed to yours on price, risk allocation, and disclosure. You need your own lawyer representing you specifically.
When should I actually bring in a lawyer — before or after I make an offer?
Ideally before you sign a letter of intent, since even the LOI can include immediately binding clauses. At the latest, before you sign anything at all.
Is it worth it for a very small, simple purchase?
Even a small purchase involves a change of legal ownership, potential employee obligations, and contracts or a lease that need to transfer properly. "Small" doesn't mean risk-free — it usually just means the legal work is narrower in scope.
This is a business purchase or sale question
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