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  • Writer's pictureAlex Robertson

What to Consider when Buying or Selling a Business in BC

Updated: May 29, 2020

Are you interested in buying or selling a business? Learn about the options and important considerations involved in the purchase or sale of an existing business.

The purchase or sale of a business can involve significant financial risks for both the buyer and the seller. It is important for both parties to have a team of specialists on their side to ensure that these risks are properly accounted for. For the seller, the goal of a sale is to maximize post-tax income resulting from the sale while minimizing ongoing obligations and liabilities to the buyer. For the buyer, the goal of a purchase is to minimize the cost of purchase while hedging against future risk by securing representations and warranties from the seller. At Derpak White Spencer LLP, we have been helping individuals navigate the legal aspects of business purchases and sales for over 50 years.


During the initial stages of negotiation, a buyer will generally make a non-binding offer to the seller by sending a letter of intent. This letter will outline the tentative arrangement between the two parties. It is important during this stage to decide whether the transaction will be structured as a sale of shares in the business, or if the buyer will merely purchase the assets of the business. This distinction will have important legal and financial consequences for both parties, as well as implications for the transaction itself, so it is imperative for the structure of the deal to be properly considered.


When negotiating, it is important for both parties to consider whether the sale will be structured as an asset transaction or a share transaction.

In an asset transaction, the buyer agrees to purchase only the assets (tangible and/or intangible) of the seller’s business. This allows the buyer to choose which rights and obligations of the business they will assume upon completion of the sale.

Notwithstanding this, liabilities of the seller’s business can be passed onto the purchaser in an asset structured transaction (i.e. employee severance, WCB, GST, etc.) and thus it is important to have a lawyer undertake any necessary due diligence.

In a share transaction, the buyer purchases shares of the business, and consequently assumes control of the business’ rights, obligations, assets, and liabilities at the time of sale. In general, buyers will prefer to purchase the assets of the business in order to minimize their exposure to liabilities, whereas sellers will prefer to sell shares of the business in order to discharge themselves of liability.

Each type of transaction will have very different tax implications so it is important for both buyers and sellers to have their accountants perform a cost-benefit analysis comparing both options in order to determine the best course of action.


Once the buyer has received all the information he or she needs from the seller, it is important to verify it. This process may only require a few verifications pertaining to the ownership of the business’ major assets, such as real estate and/or machinery but may also require more extensive verifications including, but not limited to, audit of the business’ financial statements, contractual agreements with employees and suppliers, and researching any regulatory compliance relevant to the purchase or operation of the business. It is ideal for the buyer to be assisted by specialists during this stage, including lawyers and accountants.

Sellers, by contrast, will look to obtain the full purchase price at sale while minimizing their tax burden and future obligations to the buyer. This includes minimizing any warranties made as to the future profitability of the business, as well as fully discharging himself or herself of any liability associated with the business.


If the buyer is satisfied that the information he or she has received is accurate, he or she may then choose to formalize the deal. Ideally, both parties will have had a lawyer present during the initial stages of the negotiations to ensure that their clients are not bound to unfavourable terms. However, in an instance where the buyer and seller have already agreed upon the conditions of the transaction, a lawyer can help to advise his or her client of what the agreement will imply, as well as to mitigate the damage caused by agreeing to unfavourable terms.

During this stage of the transaction, lawyers will secure the consent of any relevant third parties to the sale, conduct final searches on any claims against the business’ assets, and write up the closing documents to be signed by both parties.


Agreements should provide a certain date for closing. This can either be a specific day or be based off a particular future occurrence such as landlord or lender approval.

Contact Us

Whether you are interested in buying or selling a business, Derpak White Spencer LLP is here to help. With over fifty years in the industry, our firm is staffed by a team of professionals who can assist you in all aspects of purchase or sale.

Call us at (604) 736 9791, or email Alex Robertson.


Disclaimer: This article is not intended to serve as, or should be construed as legal advice, and is only to provide general information. No portion or use of this article will establish a lawyer-client relationship with the author or any related party. Should you require legal advice for your particular situation, please get in touch with us.


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