Purchasing A Business :
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Agreement of Purchase and Sale:
Should be reviewed and/or drafted by me before being signed. If it is reviewed after all parties have signed it is too late. I will probably advise you to incorporate because tax rates are lower for dividend income and it provides you with limited liability. To incorporate in the Province of Ontario will cost you a registration fee of $360.00. If you incorporate and there is more than one shareholder then it is recommended that you have a shareholders agreement. Shareholders agreements deal with what happens in the case of a death or disability of one shareholder or the eventuality of one shareholder wanting to sell his or her interest to a third party. Often it is recommended that cross life insurance policies are maintained in order to fund buy-sell provisions in the case of a death of a shareholder.
Government Requirements:
You will need to obtain a GST and PST number, local municipality business licence and possibly a liquor licence if you are operating a restaurant.
Leases:
If a lease is being assumed this must be reviewed by me. I would ensure the lease is in good standing, is not in arrears and that the landlord consents or agrees to allow you to assume the existing lease. Often you can use this review process as an opportunity to renegotiate the term or monthly payment of the lease. It is best to purchase a business when there are many years left on the lease, assuming that the lease is at a competitive rate, in order to allow you the maximum amount of time to recoup your investment.
Inspections:
The vendor's solicitor or I will order health and fire inspections by the local authorities. It is recommended that you have the assets and inventory be appraised and inspected for merchantability and fitness for use. |
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