Which licences, permits and tax accounts transfer when I buy a business?

Licences follow the licensee, not the business

A licence is permission given to a particular person or corporation. Municipal business licences issued under the Municipal Act, 2001, liquor sales licences under the Liquor Licence and Control Act, 2019, food premises approvals, trade and professional registrations and industry-specific permits each have their own rules on transfer, and many cannot be transferred at all. In a share purchase the licensee is unchanged, though some regulators must be told of a change of control. In an asset purchase, assume you need to apply.

Lead times vary from days to months. Find out early which approvals are needed, whether the business can lawfully operate while an application is pending, and build the answer into the closing date and the conditions.

Business number, HST and payroll accounts

In a share purchase the corporation keeps its business number and its HST, payroll and corporate tax accounts; you update the authorized contacts and directors. In an asset purchase the seller's accounts stay with the seller and you register your own before closing. That matters for the s. 167 election, which cannot be made if the seller is registered for HST and you are not, and for running payroll from the first day.

The Canada Revenue Agency explains what changes on a change of ownership on its business pages. Your accountant will usually handle the registrations, and we confirm they are in place before the closing agenda is finalized.

Clearances and certificates that protect a buyer

Three pieces of paper reduce the risk of inheriting the seller's debts. A WSIB clearance certificate confirms the seller's account is in good standing. A retail sales tax clearance certificate under s. 6 of the Retail Sales Tax Act confirms no retail sales tax is owing; a buyer who closes without it can be held responsible for the seller's arrears. Where real property is involved, a tax certificate from the municipality shows property tax arrears.

The Canada Revenue Agency does not issue a clearance to a buyer of a going business. For income tax, HST and payroll arrears you rely on statements of account, warranties, an indemnity and, where doubt remains, a holdback.

Business names and corporate filings

If you will carry on business under a name other than your corporation's legal name, register it under the Business Names Act through the Ontario Business Registry; the seller's registration does not transfer. After a share purchase, the corporation must file a notice of change under the Corporations Information Act within fifteen days of any change in its directors, officers or address, and the minute book should record the share transfer and new appointments.

Trademarks, domain names, social media accounts and software licences each have their own transfer mechanics and belong on the closing agenda.

Zoning and inspections

Check that the current use of the premises complies with the municipal zoning by-law and that any required inspections, such as fire, health or building, are current. A business operating under a legal non-conforming use or a conditional permit may not be able to expand or change its use, and a lapsed inspection can delay a licence transfer. Municipal compliance letters take time, so request them at the start of diligence rather than in the last week before closing.