160 Quarry Park Blvd SE, Suite 300 · Calgary, Alberta
160 Quarry Park Blvd SE, Suite 300 · Calgary, Alberta
Home / Corporate Commercial / Buying & Selling a Business
Whether you are buying your first business or selling one you built, we guide Calgary clients from letter of intent to closing and beyond.
In an asset purchase you buy selected assets; in a share purchase you buy the company itself, including its history and liabilities.
The first decision in any deal is how it will be structured. When buying or selling a business in Calgary, the choice between an asset purchase and a share purchase affects tax, liability, consents and the paperwork required.
Buyers often prefer assets for the cleaner risk profile and tax benefits, while sellers often prefer shares, partly because a share sale may allow access to the lifetime capital gains exemption when the shares qualify. The final structure is usually a negotiation, and your accountant should be involved from the start.
In focus
| Issue | Asset purchase | Share purchase |
|---|---|---|
| What is bought | Selected assets and agreed liabilities | The corporation, with all assets and liabilities |
| Historical liabilities | Generally stay with the seller | Stay with the company, so the buyer bears them |
| Contracts and leases | Usually need to be assigned, often with consent | Usually stay in place, subject to change-of-control clauses |
| Tax considerations | Often favours the buyer | Often favours the seller |
| Paperwork | Transfer of each asset | Transfer of shares and corporate records |
A letter of intent records the key deal terms before the full agreement and should be clear about which parts are binding.
Most transactions begin with a letter of intent (LOI) or term sheet. It sets out the price, structure, key conditions and timeline, and gives both sides a framework before they spend money on due diligence and drafting.
An LOI is usually non-binding on the main deal terms, but certain clauses are often intended to be binding, such as:
Tip: have a lawyer review the LOI before you sign. Terms agreed at this stage, like price adjustments or working capital targets, are hard to reopen later, and unclear wording can create a binding deal you did not intend.
Due diligence tests the seller’s claims by reviewing corporate records, contracts, liabilities, assets and legal compliance before you commit.
Due diligence is your chance to confirm that the business is what the seller says it is. Working alongside your accountant, we typically review:
The depth of review depends on the size and type of business. In a share purchase, diligence is especially important because the liabilities come with the company. Findings often lead to price changes, specific indemnities or extra closing conditions.
The purchase agreement allocates risk through representations, warranties, indemnities and holdbacks, and sets the conditions for closing.
The asset purchase agreement or share purchase agreement is the heart of the deal. Beyond price and payment terms, the key provisions include:
For sellers, the aim is to limit exposure with clear disclosure schedules and reasonable caps. For buyers, the aim is meaningful recourse if something turns out to be wrong. We negotiate these terms with your priorities in mind.
Plan early for how employees transfer, whether the landlord must consent, and which contracts need approval to move to the buyer.
Employees. In a share purchase, employees stay with the same employer. In an asset purchase, the buyer typically offers employment to the staff it wants to keep. Alberta’s Employment Standards Code can treat employment as continuous when an employee stays on after a sale, so past service may still count. Termination obligations for those not hired need to be addressed in the agreement.
Leases. Commercial leases usually require the landlord’s consent to an assignment, and many treat a change of control of the tenant corporation as an assignment. Landlords may ask for financial information or a personal indemnity from the buyer. For premises issues, our commercial real estate team can assist.
Other consents. Key supplier, customer, franchise or licence agreements may need approval. Identifying these early avoids a last-minute scramble that delays closing.
We review loan and investor documents independently, and provide the lawyer’s certificate Alberta requires for personal guarantees.
Many purchases are financed through a bank loan, vendor take-back financing or investors. Each carries its own documents: commitment letters, loan agreements, general security agreements and investor contracts. We review these independently so you understand the covenants, default triggers and security you are granting.
Lenders often require owners to personally guarantee the business’s debt. Under Alberta’s Guarantees Acknowledgment Act, a guarantee given by an individual is generally not enforceable unless the guarantor appears before a lawyer, acknowledges the guarantee, and the lawyer completes the required certificate. We provide this independent legal advice and make sure you understand what you are signing.
Vendor financing: if the seller is financing part of the price, the security documents and priorities with the bank need careful drafting to protect the seller if the buyer defaults.
Franchise purchases involve the franchisor’s disclosure obligations under Alberta’s Franchises Act and its approval of any transfer.
When buying a new franchise, Alberta’s Franchises Act generally requires the franchisor to give you a disclosure document at least 14 days before you sign any agreement or pay any money. We review that document and the franchise agreement with you before you commit.
Buying an existing franchised location adds another layer. You are dealing with the selling franchisee and the franchisor, and the franchisor will usually need to approve you, may require you to sign its current form of agreement, and may charge a transfer fee or require renovations. Some resales may be exempt from the disclosure requirements, so it is important to ask the right questions and review the franchisor’s records directly.
For more on franchise agreements and disclosure, see our business agreements page.
At closing we coordinate funds, discharge the seller’s debts, complete assignments and transfers, and follow up on post-closing items.
Closing brings together every thread of the transaction. We prepare and exchange the closing documents and coordinate with the other lawyer, lenders and landlord. Key steps include:
After closing, there is usually follow-up: working capital and inventory adjustments, release of holdbacks once claim periods expire, filing notices of change with the Corporate Registry, and transferring business licences, utility accounts, websites and phone numbers. Sellers should also confirm that any personal guarantees they gave have been released. We keep track of each item so nothing is missed.
Sellers get better outcomes by organizing records, fixing legal gaps and planning tax well before a buyer arrives.
A well-prepared business is easier to sell and harder for buyers to discount. Before you go to market, we recommend:
Consider, too, what the sale means for you personally: whether you will stay on for a transition period, accept a non-compete, or take part of the price over time through vendor financing or an earn-out. Each of these should be reflected in the agreement. Preparation also helps you respond quickly to due diligence requests and negotiate from a position of strength.
FAQs
How long does it take to buy a business in Alberta?
It varies with the size of the business, the financing and the consents needed. Smaller deals may close within weeks of a signed letter of intent, while larger ones with extensive due diligence, lender requirements or landlord and franchisor approvals can take several months. We build a realistic timeline with you at the outset.
Should I hire a lawyer before signing a letter of intent?
Yes. Even when the main terms are non-binding, the LOI sets the price, structure and expectations that the rest of the deal builds on, and clauses such as exclusivity and confidentiality are usually binding. A short review at this stage can prevent expensive renegotiation later.
Can the same lawyer act for both the buyer and the seller?
Generally no. The buyer and seller have opposing interests on price, warranties and indemnities, and Law Society rules strictly limit when one lawyer can act for both sides of a transaction. Each party should have its own lawyer to protect its position.
What happens to the employees when a business is sold?
In a share sale, employees stay with the same employer and their employment continues. In an asset sale, the buyer usually decides whom to offer employment to, and past service may still count under Alberta's Employment Standards Code. The purchase agreement should clearly allocate responsibility for any terminations.
Why is a holdback used when buying a business?
A holdback keeps part of the purchase price in trust or escrow for a period after closing. It gives the buyer a practical source of recovery if a warranty proves untrue or a liability surfaces, and it covers price adjustments such as inventory or working capital counts. The amount and release terms are negotiated.
Do I need my accountant involved in a business sale?
Yes. The tax consequences of an asset or share sale can be significant for both sides, and planning such as qualifying for the lifetime capital gains exemption may take time to arrange. We work alongside your accountant so the legal documents reflect the tax plan.
This information is general and is not legal advice. For advice on your situation, book a consultation.
Book a consultation with our Calgary team before you sign a letter of intent.
or call 587-333-4358
