There are two ways you can buy or sell a business – a share purchase or an asset purchase.

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If the business is incorporated, the shares can be purchased. This allows the buyer to gain full control of the business and assume all of its assets and liabilities.

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Alternatively, parties can do an asset purchase. This involves buying all the assets of the business, including tangible items like buildings and inventory and intangible items like copyrights and trademarks. Unlike a share purchase, an asset purchase lets parties exclude certain assets or liabilities.

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As a general rule of thumb, sellers of a business tend to prefer share sales because of the favourable tax consequences for sellers (e.g., capital gains exemptions) and the ability to offload all liabilities of the business to the buyer. Meanwhile, buyers of a business tend to prefer asset purchases because of the favourable tax implications for buyers (e.g., ability to write-off depreciation of certain assets like equipment from the buyer’s taxable income) and the ability to pick and choose which assets or liabilities the buyer will assume.

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If you have questions on this topic or any other legal matters, reach out to Aman Bindra

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