Buying a Business. Shares vs Assets

When buying or selling a business, many entrepreneurs are being presented with two options - buying the shares of a business or buying its assets. Many wonder what is the difference between these two processes and why is it important to some parties to insist on one type of a transaction or another.
Shares purchase.
This transaction results in the shares - the ownership and control of the actual legal entity, the company or the business, being transferred to a buyer. The resulting consequences of the transaction is that all business liabilities and obligations are being transferred as well. These might include such liabilities as product liability, warranty, liability for environmental damages, employment issues and historical tax liabilities. In some instances, the real value of the liabilities might become known only years after the transaction and might significantly exceed the actual price of the transaction. This is why Sellers would usually prefer this type of transaction - it releases them from almost all future claims and demands relating to the business.
Assets purchase transaction results only in a transfer of assets of a corporation from one “owner” to another. The company and all its existing liabilities remain with the seller, while the buyer purchases only tangible (equipment, inventory, building etc.) or intangible (business name, intellectual property etc.) assets of the business. This type of a transaction would usually be preferred on the buyer since they do not acquire any of the business’ existing liabilities and can start business operations “anew”.
There are, of course, many exceptions for these general rules and a support of a professional person (usually lawyer) is highly advised for these types of transactions.
At CBES - Canadian Business and Enterprise Services, we offer a comprehensive approach where our professional advisers will assist you in evaluating the deal and adopting the most beneficial and preferred for you approach.
Our website - cbes.ca/
Facebook - / canadianbiz
LinkedIn - / cbes
All information provided in this video is for informational and reference purpose only. Nothing contained herein shall be considered as a legal advice or instructions to be acted upon. CBES - Canadian Business and Enterprise Services does not offer legal advice online or on its KZbin channel. Please consult a professional before you act in reliance on the information contained in our videos.
#BuyingABusiness #BusinessCanada #SharesPurchase #BusinessOwner #BuyingACompany
• Buying a Business. Sh...

[@businessincanada-doitright1822]

When buying or selling a business, many entrepreneurs are being presented with two options - buying the shares of a business or buying its assets. Many wonder what is the difference between these two processes and why is it important to some parties to insist on one type of a transaction or another. Shares purchase. This transaction results in the shares - the ownership and control of the actual legal entity, the company or the business, being transferred to a buyer. The resulting consequences of the transaction is that all business liabilities and obligations are being transferred as well. These might include such liabilities as product liability, warranty, liability for environmental damages, employment issues and historical tax liabilities. In some instances, the real value of the liabilities might become known only years after the transaction and might significantly exceed the actual price of the transaction. This is why Sellers would usually prefer this type of transaction - it releases them from almost all future claims and demands relating to the business. Assets purchase transaction results only in a transfer of assets of a corporation from one “owner” to another. The company and all its existing liabilities remain with the seller, while the buyer purchases only tangible (equipment, inventory, building etc.) or intangible (business name, intellectual property etc.) assets of the business. This type of a transaction would usually be preferred on the buyer since they do not acquire any of the business’ existing liabilities and can start business operations “anew”. There are, of course, many exceptions for these general rules and a support of a professional person (usually lawyer) is highly advised for these types of transactions. At CBES - Canadian Business and Enterprise Services, we offer a comprehensive approach where our professional advisers will assist you in evaluating the deal and adopting the most beneficial and preferred for you approach.

[@SssSss-pl6pb]

What would be more expensive share ?

[@allszn]

Thank you for going into a bit of detail as well as examples. As someone just entering this space, I had no idea about all possible consequences. Appreciate it!

[@michaelpafiti2141]

great video for initial information about buying a business - thankyou

[@businessincanada-doitright1822]

Thank you

[@Elfyja]

Thanks man this was great

[@chloeohayon1603]

Amazing video!!

[@kenanwhyle7039]

nice

[@khalafismail3123]

hi what will happen to invitae current shareholders after selling most of its assets to Labcorp will Labcorp compensate the invitae's shareholders or they will remain invitae shareholder and if invitia manged to emerg from chapter 11 what will happen to its existing current shareholders

[@harkeeratsingh3808]

Hi, is it better to use a lawyer to incorporate or do it yourself through CBCA? Please let me know. I usually use a lawyer but I saw its only $200. If I incorporate myself, can I pay my lawyer to put together the minute book?

[@businessincanada-doitright1822]

Dear Harkeerat, First of all, there are many issues in the process of incorporation itself - classes of shares, division of control over the corporation and how to structure the initial incorporation application in a way that the company will enjoy from the most preferential tax treatment in the future. Minutes Book usually constitute about 60% of the cost, so I guess you will not gain much by asking your lawyer to prepare the Book only. That being said, if the money is an issue (and it usually is for starting businesses), then the proposed approach is justified - you first incorporate yourself (taking into account that in the future someone might have to correct your mistakes) and once you have funds, you approach a legal adviser to organize your corporation. This approach will ease the financial burden, but not necessarily result in savings (and frequently will cost more).

[@richreviews1279]

Great video! 👍 I need advice I was thinking of buying an existing Amazon FBA business, in which I’ll get paid overnight. And than getting into the Cleaning industry and buying a cleaning business and than acquiring a bunch of them thereafter. Is this ok?? Look forward to get your input.👍

[@maggieromano1686]

Hi, what is consider a closing date as the sales of the company (shares sell) if the buyer signed an agreement to buy in September 13 but the purchase funds(transfer of shares) come in to pay in October ! Is the company being sold in September or October?

[@businessincanada-doitright1822]

Maggie, I am afraid this question is a bit too complicated to answer as the comment to a video. Anyway, fist of all I have to see the agreement and what it says about the effective date. Then - when did the buyer receive the control over the corporation? In many cases the payment for the shares and their actual transfer happens in stages, but the control is transferred immediately. I would say that the actual date of the signature of the agreement plays the lesser role of all... If you need a more professional advice and review of the transaction - I would be happy to assist but definitely not in a public forum.

[@JamesFibond-pj1xt]

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