Can I put some of the assets I’m buying into a second company?

A buyer may want the building in one company, the equipment in another and the operating business in a third. The question is when the split happens. It can be written into the purchase agreement from the start, or made later by moving assets between your own companies. The first is one set of steps. The second is a separate transaction with its own paperwork and, for land, its own tax unless an exemption applies.

The price has to be divided asset by asset

Whichever company receives an asset has to pay for it. CRA’s page on selling a business refers to a value for each asset, including inventory and goodwill, and the Canada Small Business Financing Program guidelines say an agreement should set out the allocation of the price for each listed asset. In a split deal each buyer’s share of the price follows from that allocation.

Land is taxed when it changes hands

In Ontario, you pay land transfer tax when you acquire land or an interest in land, due when the transaction closes, and the province lists exemptions for certain transfers, such as from an individual to a family business corporation. In British Columbia, the purchaser of property registered at the Land Title Office files a property transfer tax return and pays unless an exemption applies. Buying a building into the company meant to own it, or buying it and moving it, can mean one taxable transfer or two. Other provinces have their own rules.

Moving assets after closing

CRA’s form T2057 is the joint election under subsection 85(1) for a taxpayer’s disposition of property to a taxable Canadian corporation. Whether it fits is a question for your accountant, who should see the plan before you sign. A holding structure for the shares is a different question, covered in should I buy through a holding company.

The GST/HST election and your lender

CRA says a seller and buyer may jointly elect for no GST/HST on the sale of a business if the buyer acquires enough of the property reasonably needed to carry on the business, and the purchaser files Form GST44 by the due date of its next GST/HST return. If the assets go to two buyers, ask your accountant which company is the purchaser for that test. BDC asks for the transaction structure and how the price was set, so tell your lender about a second company at the start.