Can I use two corporations to buy different parts of a business?

Splitting a purchase between two corporations is a structuring choice, for example to keep operations and other assets in separate entities. Nothing in the sources checked for this page says it cannot be done. The questions that matter are how the tax and regulatory rules treat each buyer and the transaction as a whole. Your lawyer and accountant should settle the structure before you sign.

GST/HST: the s.167 election

Section 167 of the Excise Tax Act applies where a supplier supplies a business or part of a business and the recipient acquires all or substantially all of the property that can reasonably be regarded as necessary for the recipient to carry on that business or part. A supplier and recipient may then make a joint election, except where the supplier is a registrant and the recipient is not. With two buyers, each corporation is a separate recipient, so ask your accountant whether each one meets that test for the part it takes.

Competition Act notification

Subject to that Part of the Act, including the exemptions in s.111, the notification duty in s.114(1)(a) of the Competition Act covers a person, or two or more persons pursuant to an agreement or arrangement, proposing to acquire assets in the circumstances set out in s.110(2). Two buyers acting under one agreement or arrangement can therefore fall within the wording. Whether the size tests in ss.109 and 110 are met is a question for counsel; under s.110(8) the transaction-size amount is any prescribed amount or, if none, one the Minister determines each year, and s.110(9) requires the Minister to publish it in the Canada Gazette.

Ontario WSIB purchaser liability

WSIB says that when you buy a business’s assets you should get a purchase certificate, which verifies that the seller has WSIB coverage and no outstanding debts on the account, and that the request must be made before the date of sale. It says it may hold the purchaser liable for all amounts the vendor owed up to the date of sale if you do not get a valid one. If two corporations each take assets, ask WSIB or your lawyer who should request the certificate and how each buyer should be identified.

Points to settle before signing

• Which assets, contracts, licences and employees go to which corporation.
• Whether each lease, licence and key contract can be transferred to the corporation that will use it.
• Whether one agreement or two will bind the seller, and who gives each warranty.