Buying an existing business is unlike buying a house or a car. A business is on the whole an intangible asset. Though there are tangible assets such as equipment, inventory, leased premises, these are merely tools for achieving a future stream of revenue. In business, that future stream of revenue is never assured and there are myriad risks involved. Some risks are beyond your control, others can be managed. We can assist you to reduce or eliminate certain risks to help position you for success.
The purchase of a business takes 1 of 2 forms: asset purchase or share purchase.
With an asset purchase, you as buyer purchase the assets of the business (equipment, leasehold improvements, inventory, goodwill, customer lists, etc.) but not the debts of the business, which the seller is supposed to pay out at the time of sale. With our assistance, you can purchase the assets of the business and operate without worrying about being responsible for any pre-existing debts or even unknown debts. This is the biggest advantage of the asset purchase. From a tax perspective, an asset purchase is often more favourable to you as the buyer but this is a matter to be discussed with your accountant.
Where the business is incorporated, the purchase of a business can also be done by way of a share sale. You as buyer purchase the shares of the company, thus becoming the owner of the business (through the company). The assets of the business remain with the company and in most cases, so do the debts. Your biggest risk with the share purchase is that some debts may be unknown at the time of purchase and unplanned for. We can help you mitigate those risks by drafting proper provisions in a share purchase agreement. The biggest advantage of a share purchase is that in most cases, there is no change of ownership in the assets, equipment and debts and fewer changes needs to be made as far as changing over supplier accounts, utilities, etc. However, other items do require changes (consent of the landlord, consent of the franchisor (for franchise purchases) signing authority on bank accounts, some licences (eg. liquor licence). From a tax perspective, a share shale is often more favourable to the seller but this is a matter to be discussed with your accountant.
Your legal expenses are made up of:
For business purchases, the total costs depend on the nature of the transaction itself and we typically charge you based on time spent at a set hourly rate. In some cases, unexpected problems arise which can drive up the costs. However, we attempt to provide you with a range for your anticipated legal costs. Feel free to contact us and we will be pleased to review your needs and provide you with the estimated costs.
BUYING A HOME IS ONE OF YOUR BIGGEST DECISIONS IN LIFE. LET US GUIDE YOU THROUGH THE PROCESS.