How do I buy a business from a retiring owner?

Buying from a retiring owner means planning around the owner’s departure. Read how a succession plan is built to see what the seller should already have prepared. BDC tells buyers to plan for how long it takes from deciding to pursue an acquisition to closing the deal, so allow time to learn the business before the owner leaves.

Test how much depends on the owner

BDC’s due diligence guide asks questions to put to the owner. When the vendor leaves, do the customers leave too? Who is actually running the business day to day? Which key employees will stay after closing? It also treats vendor financing and earnouts as part of that review. BDC notes you may need to meet key employees to learn whether they see themselves staying, and that some vendors hesitate to allow it, so ask early.

Agree the handover

Write down how long the owner will stay, what they will do in that time, and how introductions to customers and suppliers will happen. Put it in the purchase agreement rather than leaving it as a promise. If the sale includes payments after closing, link them to the handover so both sides know what each has to do.

Check what actually transfers

The CRA says a sole proprietorship is legally and directly tied to one individual, and that a new owner cannot continue using the old business number. For a corporation, structure or owner changes must first be updated with the federal or provincial incorporating authority, and the CRA is then sent supporting documents. If partners change, the CRA says the business may be treated as a new legal entity with a new business number.

Licences and approvals

If the business needs a licence, a college registration or a landlord’s consent, ask the regulator or landlord what happens when ownership changes, and make closing conditional on the answer. The rule differs by trade and by province.