Award Winning Tax Lawyers in Toronto – Barrett Tax Law

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CANADA'S LEADING TAX LAWYERS

Selling or Acquiring
a Private Canadian
Business? Avoid Potential Legal Issues

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We have Helped Hundreds of Individuals Acquire a Business in Canada!

01.

Assist you  to properly understand how structuring the deal will affect your tax liability behind the scenes.

02.

Have an experienced lawyer who will advocate desirable deal terms and advise on your legal rights which will influence business goals. 

03.

Guide you through the process of purchasing or selling a private Canadian business including reviewing and advising on terms of a deal including representations and warranties

04.

Thoughtfully advise on how your business can be protected from liability throughout stages of a transaction and ultimately upon its sale, or during the acquisition of a separate business.

Business Sales
and Acquisitions

In selling or acquiring a private Canadian business, there are many potential legal issues which require flexible and well-researched solutions.

Like an asset sale, the purchasers’ interests in a share sale will generally be contrary to that of the vendor. For example, the purchaser generally would seek to retain a high stated capital account (i.e., funds that can be returned to shareholders tax free) for the subject shares, where present shareholders may desire a tax-free return of retained earnings prior to their business’s sale. This, among other tax considerations, will influence negotiations between transacting parties.

 

Negotiations on an asset sale will naturally come down to the allocation of the purchase price. It is well advised to have counsel on how receipts (from the vendors perspective) or outlays (from the purchasers’ perspective) will influence tax liabilities in the year of a transaction, or for future tax years.

Business Sales
and Acquisitions

In selling or acquiring a private Canadian business, there are many potential legal issues which require flexible and well-researched solutions.

Like an asset sale, the purchasers’ interests in a share sale will generally be contrary to that of the vendor. For example, the purchaser generally would seek to retain a high stated capital account (i.e., funds that can be returned to shareholders tax free) for the subject shares, where present shareholders may desire a tax-free return of retained earnings prior to their business’s sale. This, among other tax considerations, will influence negotiations between transacting parties.

 

Negotiations on an asset sale will naturally come down to the allocation of the purchase price. It is well advised to have counsel on how receipts (from the vendors perspective) or outlays (from the purchasers’ perspective) will influence tax liabilities in the year of a transaction, or for future tax years.

From a tax law perspective, the following issues may be considered from the vendors perspective:

whether the shares qualify as small business corporation shares, entitling the vendor to a lifetime capital gains exemption of approximately $892,000 (indexed for 2021);

whether retained earnings may be returned to the shareholders prior to sale, or included in the purchase price; and

whether a corporate reorganization in contemplation of or as part of the sale makes sense.

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Years of experience in tax law gives us an edge on advising your business sale or acquisition. Call us for Assistance!

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