What does it cost to transfer ownership of a business in Canada?

The cost of a business transfer in Canada is not a fixed fee. It is the sum of several items that depend on how the deal is built: professional fees, any sales tax on what is bought, and, in British Columbia for example, provincial sales tax on taxable assets. This page lists the categories and what the official sources say about each. It does not estimate amounts.

Who bears which cost

BDC lists, among the clauses a letter of intent may include, the distribution and responsibility for costs inherent to the proposed transaction, whether closed or not. That makes cost-sharing a negotiated term. See who pays for due diligence for the adviser side. For the seller’s costs, see what it costs to sell a business.

GST/HST on a business sale

Section 167 of the Excise Tax Act applies to a supply of a business or part of one where the recipient acquires all or substantially all of the property reasonably necessary to carry it on. Where it applies, the supplier and recipient may make a joint election, except where the supplier is a registrant and the recipient is not. Subsection (1.1) sets out the effect and the filing condition, and it still leaves tax on some supplies, such as services the supplier renders and leases. Whether your deal qualifies is a question for a tax adviser.

Provincial sales tax

British Columbia’s Ministry of Finance says PST does not apply to goodwill, but the value agreed for goodwill must be reasonable. The parties cannot raise the goodwill price and cut the price of taxable assets below fair market value to avoid PST. It also says a purchaser should hold a clearance certificate before buying a business. Ask an adviser how sales tax applies in your province.

Paying for it with financing

BDC’s business purchase loan page tells borrowers to include legal fees, moving expenses and other one-time costs in the loan to reduce upfront expenses. That describes BDC’s own product. Ask any lender which closing costs it will include. Ask your lawyer whether the structure, shares or assets, changes the steps and fees, and whether land or a building is part of the deal.