Buying & Selling a Business – Share Purchase/Sale vs. Asset Purchase/Sale

Buying & Selling a Business – Share Purchase Sale vs. Asset Purchase
Date: 10 Feb, 2022| Author: Fred Streiman

The number one item to consider when purchasing or selling a business is whether the transaction should be structured as an asset or share purchase/sale. Although both accomplish the same task of completing the transaction and transferring ownership in the business, they can have different consequences for both prospective buyers and sellers.

An asset sale is the purchase/sale of individual assets and liabilities, whereas a share purchase/sale is the purchase of the owner’s shares in a corporation. While there are many significant considerations when determining which type of transaction to implement, potential liabilities and tax implications are among the primary concerns.


When using the structure of an asset sale, the vendor retains possession of the corporation, and the buyer purchases individual assets of said corporation. This can include items such as equipment, leaseholds, licenses, inventory, goodwill, fixtures, trademarks and trade secrets, telephone numbers, websites etc.

The main reason why a purchaser would seek to structure the transaction as an asset sale is because the purchaser will typically be able to select only those assets it wishes to purchase and can select from the liabilities it wishes to assume. This prevents the purchaser from acquiring unknown liabilities (such as tax or employment liabilities) as would be assumed when a corporation’s shares are purchased.

When considering tax implications, the purchaser will want to acquire assets at the highest possible undepreciated capital cost (“UCC”). The UCC is the current value of depreciable assets which have been previously recorded on the corporation’s tax return after the depreciation deductions for that year. The higher the UCC the greater the future deductions for depreciation will be for the purchaser. On the other hand, a seller will typically seek a lower allocation as this will dictate the capital gains tax triggered on the sale, and the seller will not want the purchase price of the assets to be allocated among its assets in an amount greater than the UCC as this will trigger “recapture” taxes.


When using the structure of a share sale/purchase, the buyer purchases the selling shareholders stock, and thus obtains ownership in the seller’s legal entity/corporation. The actual assets and liabilities acquired in a transaction of this nature tend to be similar to those in an asset sale. However, unlike an asset sale, share sales do not require numerous separate conveyances of each individual asset as the title of each asset lies within the vendor corporation.

One large advantage in a share sale/purchase goes to the vendor. From a tax perspective, it is beneficial to the seller as there is a Lifetime Capital Gains Exemption (“LCGE”)on the sale of shares. The LGCE allows the seller of shares an exemption from taxes up to the amount of $892,218.00 on the sale of qualifying shares. Another advantage to the seller is that typically the seller will transfer all of its liability along with the sale.


If you are planning on selling or purchasing a business, it is imperative that you contact a qualified lawyer as well as a qualified accountant with experience in both asset and share transactions in order to determine the best course of action for you. Dale Streiman Law LLP would be happy to assist with the purchase or sale of a business, and we will work hard to ensure you obtain your desired results.