In an asset purchase, the buyer acquires specific assets of the target business — equipment, inventory, customer lists, intellectual property, goodwill, and sometimes real property — and assumes only the liabilities explicitly agreed to. The seller retains the corporate entity and any liabilities not transferred. Asset purchases are the default preference for buyers in Canadian SMB transactions because the buyer steps into a clean slate without inheriting unknown liabilities (lawsuits, CRA tax debt, employee severance claims). The buyer also gets to restart Capital Cost Allowance (CCA) claims on depreciable assets at their current fair market value, which can reduce taxes in the early years of ownership. The main downside for buyers is administrative — licenses, permits, contracts, and leases must each be assigned or re-applied for separately. Landlord consent to lease assignment is often the single biggest closing risk in BC retail and restaurant acquisitions. GST/HST implications differ for asset versus share deals and must be reviewed with a Canadian accountant. In most BC SMB deals under $2M, asset purchases are the norm unless the seller insists on a share deal due to the Lifetime Capital Gains Exemption.
A buyer acquiring a Coquitlam pet grooming salon does so as an asset purchase. She buys the equipment, customer database, brand name, and goodwill — but not the HST account, any employee claims predating her, or the supplier credit account. She applies for a new business licence and negotiates a direct lease with the landlord.
Deal structure decisions have major tax and liability consequences in Canada. Ali works with your accountant and lawyer to make sure the structure that closes also protects you.