The short answer

An asset sale transfers the agreed business assets and obligations described in the deal. A share sale transfers shares in a corporation. The structure can affect tax, liabilities, contracts and approvals, so the appropriate choice depends on the business and professional advice—not a universal rule.

First, define what is changing hands.

For an asset transaction, begin with a clear schedule of what is included: equipment, inventory, business names, systems and other agreed items. Also identify commitments that need to be addressed. Do not assume a phrase such as ‘the whole business’ settles the detail.

For a share transaction, establish which corporation and which shares are being acquired. The buyer’s review needs to look at the company and its history as well as the current operation. Ask your lawyer to explain how ownership and responsibilities are affected in the proposed deal.

Compare the operating handover.

Prepare a table of important relationships: premises, customers, suppliers, staff and financing. Ask the responsible advisor what each agreement says about transfer or change of control. Neither structure should be treated as a shortcut around reviewing the contracts.

  • Who owns or leases the assets used by the business?
  • Which agreements require consent or another step?
  • What cash, debt or working capital is included?
  • How will unfinished jobs and customer deposits be treated?

Ask for a transaction-specific tax comparison.

CRA’s selling-a-business guidance covers matters such as asset allocation, business accounts and tax treatment. It is a starting point, not a calculation of your outcome. Ask your accountant to compare the proposed structures using the actual business, ownership and transaction details.

Avoid relying on a generic online example to decide what you will receive after tax. The relevant facts and current rules need to be assessed for your circumstances.

Canada Revenue Agency · Selling a business

Evaluate the terms beside the structure.

List the amount payable at closing, any later payments, conditions, security and transition responsibilities. Ask your advisors to explain the risks and obligations alongside the headline price. The preferred structure is part of the negotiation; it does not replace a careful reading of the complete proposal.

Bring the question forward early.

Tell your broker, accountant and lawyer what you want to keep, what you want to transfer and what you hope to do after the sale. Identifying the structure questions early can make the marketing and buyer discussions more precise. Final decisions belong in the professionally advised transaction process.

General information for people exploring a business transaction. Obtain advice suited to your business before making valuation, tax, legal or transaction decisions.