Buying a business

Whether buying a business results in requiring a new Goods and Services Tax/Harmonized Sales Tax (GST/HST) account usually depends on whether the business is incorporated or not. When you buy an existing business there are things you need to know about how the GST/HST may affect the transaction.

For GST/HST purposes, if you buy a business or part of a business and acquire at least 90% all of the property that can reasonably be regarded as necessary to carry on the business, you and the seller may be able to jointly elect to have no GST/HST payable on the sale by completing the Form GST44, Election Concerning the Acquisition of a Business or Part of a Business. The election can only be made by:

• a registrant when selling to another registrant; or

• a non-registrant when selling to either a registrant or a non-registrant.

In addition, you must buy at least 90% of the property, and not only individual assets.

Usually, for this election to apply to the sale, you have to be able to continue to operate the business with the property acquired under the sale agreement. The purchaser has to file the election with us no later than the due date of the purchaser's next return in which tax would have been payable if the election had not been made.

Another way of buying an existing business is to buy the shares of an incorporated business. This does not affect the cost base of the assets of the business. A corporation is a separate legal entity and can own property in its own name. A change in the ownership of the shares will not affect the tax values of the assets the corporation owns.

See Checklist for Small Business for more information on buying a business.

Related topics

• BusinessGateway.ca
• Related provincial and territorial government sites
• Canada's Business and Consumer Site