The purchase and sale of a business can be full of complex legal and tax issues, many of which may require the assistance of a lawyer and may not be readily apparent to the parties to the transaction. Unintended legal and/or tax consequences can result if the purchase and sale agreement is not drafted properly to address the relevant issues.
A few of the main considerations arising in respect of a purchase and sale that often require legal and/or tax advice include:
- Choosing between an Asset and a Share Sale;
- Determining the most suitable Ownership Structure for the Purchaser (e.g., corporation, individual, partnership, trust, etc.);
- Payment of the Purchase Price (e.g., will the Seller be providing vendor financing);
- Assuring Confidentiality throughout the Transaction;
- Employment/Contractor Agreements for the exiting Owner;
- Non-Competition Agreements;
- Tax Issues (e.g., income tax consequences and applicability of sales taxes); and
- Representations and Warranties made by the Buyer and the Seller.
The above considerations are only a few of the issues to be considered in buying or selling a business. Depending on the nature of the business, other factors to consider may include whether or not special licenses, permits or regulatory approvals are required, restrictions on some professional businesses imposed by law, and how to deal with outstanding liabilities of the business being purchased. Both the seller and the buyer may also want to consider whether they are adequately protected on employment, environmental and intellectual property matters.
At Stevenson Hood Thornton Beaubier LLP, we are a full-service law firm with expertise in corporate/commercial and tax law. We have handled numerous purchases and sales of businesses. To contact us, see our website at: http://www.shtb-law.com or call (306) 244-0132.
This document is intended to provide readers with general information about certain aspects of the law relating to the purchase and sale of a business. It is not a definitive analysis of the law, nor is it a substitute for legal advice.