The purchase or sale of a business will normally involve a Purchase and Sale Agreement, often on forms provided by a realtor or business broker. These forms must be tailor-made to the particulars of the transaction being entered into and need to be reviewed, and in certain cases drafted, by a lawyer.
Different tax considerations apply whether a purchase or sale is structured as a purchase and sale of the shares of an existing corporation, or whether the purchase and sale are structured as the purchase of assets. Largely as a result of tax consequences, the correct structure of the purchase or sale will result in substantially different tax consequences for both the purchaser and the vendor. In that respect, the services of a professional adviser are a necessity.
A business purchase will normally involve financing for the purchase as well as an operating line of credit for the business. Although each lender has its standard forms, all clauses in a financing commitment are negotiable and must be reviewed as to their practical and financial implications.
If the purchaser is relying upon equity financing for a purchase for on-going operations, then the requirements of applicable securities legislation must be strictly complied with.
Most business purchases or sales will involve the purchase or sale of a commercial lease, which will of necessity require the consent of the landlord. For existing businesses, there are serious consequences as to how existing employees are to be treated in the transaction.
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