Buying a business in Alberta: shares or assets?

Most business purchases I see in Alberta start the same way. The buyer and seller have agreed on a price, shaken hands, and someone has drafted a letter of intent. Then the question comes up: are we buying the shares or the assets? Too often, nobody has thought about it, and the answer affects the price, the tax bill, the timeline and the risk the buyer is taking on.

This is the conversation I have with almost every client who comes in to buy a business. Here is the short version.

What you are actually buying

Most small and mid-sized businesses in this province are owned by a corporation. If you buy the shares, you are buying the corporation itself. Nothing about the business changes on paper. The lease, the bank account, the staff, the licences and the history all stay exactly where they were. The only thing that changes is who owns it.

If you buy the assets, you are buying the things the corporation owns: the equipment, the inventory, the name, the goodwill, the customer list and whatever contracts you agree to take over. You will usually set up your own corporation to buy them. The seller keeps the old company and everything you did not agree to take.

In my experience, sellers almost always want to sell shares and buyers almost always want to buy assets. Neither side is being difficult. They simply have different interests, and most of the negotiation flows from that.

The real issue in a share purchase: you inherit the past

When you buy shares, you take the company as it is. That includes the CRA reassessment for a year three years back, the supplier who was never paid, the employee who was let go badly, and the claim that has been issued but not yet served. None of these may show up in the financial statements the seller gives you.

That does not mean you should never buy shares. It means you need to investigate properly before you commit, and the purchase agreement has to do real work. I want to see clear representations and warranties from the seller (written statements about the condition of the business), an indemnity that obliges the seller to make you whole if those statements turn out to be wrong, and, where the risk justifies it, a holdback, where part of the price is held back for a period after closing. An indemnity from a seller who has already spent the money is worth very little. A holdback is money you can actually reach.

Buying assets avoids most of this, because you choose what you take and the old liabilities stay behind with the seller’s company. But I caution clients not to treat an asset deal as a clean slate. Two things in particular follow the business. First, any lender with a registered security interest in the equipment or inventory, which is why we always search Alberta’s Personal Property Registry before closing. Second, the employees, which I come back to below.

Why the tax tail often wags the dog

For many sellers, a share sale is worth a great deal of money. The gain is taxed as a capital gain, and an individual selling shares of a qualifying Canadian small business corporation may be able to claim the lifetime capital gains exemption, which now sits at about $1.25 million and is indexed to inflation. On an asset sale, the money lands inside the seller’s corporation and is usually taxed again when it comes out.

Buyers see it the other way. When you buy assets, you record them at the price you paid, which means larger depreciation deductions in the years after closing. When you buy shares, you get none of that, and you inherit the company’s tax history as well.

There is also GST to consider. A share purchase does not attract GST. An asset purchase generally does, unless buyer and seller jointly elect under section 167 of the Excise Tax Act. That election is available only in certain circumstances, broadly where the buyer is acquiring all or substantially all of what is needed to run the business, and it is easy to get wrong.

Because so much money turns on the structure, it is often traded against the price. A seller who gets the share sale they want may come down on price. A buyer who insists on assets may have to pay more for that privilege. My advice is simple: have your accountant model both structures before you sign anything, including a letter of intent.

The practical problems people underestimate

The lease. In most of the deals I work on, the commercial lease matters more than anything else in the business. In an asset deal, the lease has to be assigned to you, and the landlord’s consent is almost always required. Landlords can be slow, and some will use the request to renegotiate terms or ask for a personal guarantee. In a share deal, the lease stays where it is, but many leases contain a change of control clause, which treats a sale of the shares as an assignment that needs consent anyway. Read the lease before you agree on a closing date.

Franchise and supply agreements. The same applies to franchise agreements, fuel supply agreements and major customer contracts. Franchisors in particular often have approval processes, training requirements and transfer fees that take time.

Licences. Some licences and permits belong to the operating entity and cannot be transferred in an asset deal. The buyer has to apply for its own, and the business cannot operate until it is issued. That can be the difference between a smooth handover and weeks of lost revenue.

Employees. Many buyers assume that buying assets lets them start over with the staff. In Alberta, that is generally not true. Section 5 of the Employment Standards Code treats an employee’s employment as continuous when a business is sold. If you keep the seller’s people, you take on their years of service, which matters if you ever need to let someone go. Decide before closing who you are keeping and on what terms, and make sure the agreement deals with vacation pay and wages owed up to the closing date.

So which should you choose?

If the seller’s company has been run carefully, its records are in order and its key contracts would be hard to transfer, a share purchase with proper protection can be the right call. If the history is unclear or the books are thin, I generally steer clients toward an asset purchase and accept that the price may need to reflect it.

Whichever route you take, do not sign a binding letter of intent before you have had legal and tax advice. Once the structure and price are fixed on paper, much of your leverage is gone.

This article is general information about Alberta law as of October 2026. It is not legal or tax advice, and reading it does not create a lawyer–client relationship. Every transaction is different, so please get advice on your own situation.