Buying a Business in Ontario: Asset Purchase vs. Share Purchase

Buying a business is a significant commitment. Before agreeing to the price or signing an offer, you need to understand what you are purchasing—and what obligations may come with it.

Two common structures are an asset purchase and a share purchase. The choice can affect existing liabilities, access to the premises, business contracts, employees and tax treatment.

Legal Route assists buyers and sellers with business purchase and sale transactions in Ontario. Legal services are provided by a lawyer licensed in Ontario.

Have you found a business you want to buy? Call 905-283-8514 to request a consultation about your proposed transaction. Consultation fees and availability will be explained before booking.

What is the difference between an asset purchase and a share purchase?

In an asset purchase, the buyer acquires specified assets of the business, such as equipment, inventory, goodwill and certain contractual rights. The purchase agreement identifies what is included and which obligations the buyer agrees to assume.

In a share purchase, the buyer acquires shares in the corporation that owns the business. The corporation remains the same legal entity and generally continues to hold its assets and liabilities. The control acquired depends on the shares purchased and the rights attached to them.

Neither structure is automatically better. The appropriate choice depends on the business, its history, the proposed terms and the buyer’s objectives.

Why does the structure matter to you?

Two transactions with the same purchase price can leave buyers in very different positions.

For example, purchasing equipment and goodwill does not necessarily secure the right to continue operating from the same premises. Purchasing shares generally leaves the business assets within the corporation, but the corporation’s existing obligations remain relevant.

Before committing, you need to understand whether the proposed arrangement gives you the business you expect and whether the risks are acceptable.

Your lawyer and accountant can assess the legal and tax implications together.

Does an asset purchase protect you from existing liabilities?

An asset purchase can provide flexibility over what is acquired and which contractual obligations are assumed. However, it does not automatically remove every legal risk.

Employment obligations, security interests and other legal requirements may still affect the transaction. Contracts, leases and licences may also require consent or separate arrangements.

The wording of the agreement and the circumstances of the business matter more than simply calling the transaction an “asset sale.”

What should you consider before buying shares?

A share purchase requires attention to the corporation’s history as well as its current operations.

Financial records alone may not reveal every contractual commitment, dispute or legal obligation. The buyer needs to understand the corporation being acquired and whether the proposed agreement appropriately addresses identified risks.

Buying shares does not, by itself, make the buyer personally responsible for every corporate debt. However, liabilities within the corporation can affect the value of the investment and the operation of the business.

Legal due diligence helps inform the decision to proceed and the terms you negotiate.

When should you contact a business purchase lawyer?

Ideally, obtain advice before signing a letter of intent, paying a deposit or entering into a purchase agreement.

Even a document described as “non-binding” may contain binding provisions. Early review can help you understand those commitments while important terms are still open for discussion.

If you have already signed a document, legal advice can help identify your existing obligations and the remaining steps.

Legal Route’s business law services include assistance with business acquisitions, purchase agreements and related commercial matters.

Frequently asked questions

Is an asset purchase or share purchase better for a buyer?

There is no universal answer. The preferred structure depends on the assets, liabilities, contracts, tax considerations and terms of the particular transaction. A structure suitable for one business may be unsuitable for another.

Will the lease transfer when I buy the business?

Not necessarily. The lease and transaction structure determine whether an assignment, landlord consent or another arrangement is needed. A share purchase may also trigger a change-of-control provision. Review these requirements before assuming you can continue operating at the location.

Can I use the seller’s purchase agreement?

You can negotiate from a seller’s proposed agreement, but it should be independently reviewed to determine whether it addresses your interests and the transaction’s risks.

Do I need both a lawyer and an accountant?

Their roles are different and often complementary. A lawyer advises on legal obligations and transaction documents. An accountant can assess financial information and tax implications. Coordinating their advice can help you evaluate the proposed purchase.

How much will legal assistance cost?

Fees depend on the scope and complexity of the work. Contact Legal Route to discuss the proposed purchase, the assistance required and applicable fees.

How Legal Route can assist

Legal Route assists with the legal aspects of buying and selling businesses, including reviewing preliminary terms, conducting legal due diligence, negotiating purchase agreements and preparing closing documents.

Our advice focuses on your proposed transaction: what you intend to acquire, the obligations involved and the terms requiring attention before closing.

Based in Brampton, we assist clients in Mississauga and across the Greater Toronto Area. Virtual and in-person consultation arrangements can be discussed during intake.

Discuss your business purchase with Legal Route

Whether you are considering an offer or have received documents to sign, contact our office to discuss legal representation.

Phone: 905-283-8514
Email: info@legalroute.ca
Office by appointment: 2074 Steeles Ave E, Unit 17, Brampton, ON L6T 5A5
Learn more: Business Law Services

Please provide only the parties’ names, your contact information and a general description of the transaction until we have completed a conflict check and provided further instructions.

We will explain consultation fees, availability and next steps before booking.

This article provides general information about Ontario business transactions and is not legal or tax advice. Legal requirements may change, and advice depends on your circumstances. No outcome is guaranteed. Contacting Legal Route does not, by itself, establish a lawyer-client relationship.

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