How do I set up an acquisition vehicle to buy a business?

An acquisition vehicle is the company that buys the business, whether it takes the shares or the assets. Setting one up means deciding where to incorporate, recording who owns it and opening the accounts the deal needs before closing. Whether to buy through a new company at all is a separate decision, covered in buying through a newly incorporated company.

Choose where to incorporate

A corporation can be formed under federal or provincial law. Under the Canada Business Corporations Act, one or more individuals or bodies corporate may incorporate by signing articles of incorporation and sending them, with the documents sections 19 and 106 require, to the Director, subject to the conditions section 5(2) sets for individual incorporators, and the corporation must keep a registered office in the province its articles name. In Ontario, for example, the Ontario Business Registry allows businesses to complete transactions online, including incorporating. Your lawyer can say which regime fits the deal.

Record who owns it

Several jurisdictions require ownership to be recorded. Corporations Canada says that since June 2019 most corporations created under the federal Act have been required to keep a register of individuals with significant control, and that since January 22, 2024 corporations created under it have had to file that information with Corporations Canada. British Columbia requires private companies to keep a transparency register, and Québec requires certain companies to declare their ultimate beneficiaries to the enterprise register. If investors or partners will hold shares, ask your lawyer which of them the register must name.

Open the accounts the deal needs

When the vehicle buys a business or part of one, its GST/HST status can matter. The CRA says a seller and purchaser may jointly elect that no GST/HST is payable on the sale of a business, among other conditions, but that the election cannot be made if only one or more assets of the business are sold, or if the seller is a registrant and the purchaser is not. The purchaser files the form with the CRA by the due date of its next GST/HST return in which tax would have been payable without the election. Settle the vehicle’s registration with your accountant before closing.

Keep the vehicle in good standing

A vehicle that holds the business has filing duties of its own. Corporations Canada says every federal corporation must file an annual return each year, which avoids potential administrative dissolution. The Ontario Business Registry says corporations must file an annual return within 6 months of their fiscal year-end. Put these dates in a calendar at the start.