Asset Sale vs. Share Sale in Canada: What's the Difference?
Asset sale or share sale? The difference when buying or selling a business in Canada, and why buyers and sellers often prefer different structures.
When you buy or sell a business in Canada, one of the most important structural decisions is whether the deal is an asset sale or a share sale. The choice affects what you're actually buying, what liabilities transfer, and the tax consequences for both sides. Buyers and sellers often prefer different structures — which makes it a common negotiating point.
This guide explains the difference in plain language. It's part of our complete guide to how to buy a business in Canada.
What is an asset sale?
In an asset sale, the buyer purchases specific assets of the business — such as equipment, inventory, customer lists, intellectual property, and goodwill — rather than the company itself. The seller's legal entity (the corporation) stays with the seller.
Buyers often prefer asset sales because they can choose which assets and liabilities to take on, and generally don't inherit the company's unknown or past liabilities. There can also be tax advantages for the buyer.
What is a share sale?
In a share sale, the buyer purchases the shares of the company itself. The business continues as the same legal entity — the buyer simply becomes the new owner of the corporation, taking on everything it owns and owes.
Sellers often prefer share sales because of potential tax advantages — in Canada, an individual selling shares of a qualifying small business corporation may be able to use the Lifetime Capital Gains Exemption, which can significantly reduce tax on the sale. A share sale can also be simpler because contracts, licences, and accounts often stay with the company rather than needing to be reassigned.
Key differences at a glance
- What's bought: asset sale = selected assets; share sale = the whole company.
- Liabilities: asset sale = buyer generally avoids past liabilities; share sale = buyer inherits them.
- Contracts/licences: asset sale = may need reassigning; share sale = usually stay in place.
- Tax: the two structures have different consequences for buyer and seller — often the core of the negotiation.
- Preference: buyers often favour asset sales; sellers often favour share sales.
Why this matters in your deal
Because buyers and sellers frequently prefer opposite structures, this is often negotiated — and the outcome affects price, risk, and tax for both sides. It's also one of the clearest reasons to have professional advisors involved: the right structure depends on the specific business, its history, and both parties' tax situations.
This is not a decision to make on general information alone. A business lawyer and an accountant should advise on the structure for your specific deal — you can find qualified professionals in the BizListings advisor directory.
The bottom line
An asset sale means buying selected assets and generally avoiding past liabilities; a share sale means buying the whole company, liabilities included, often with tax advantages for the seller. The right choice is deal-specific and has real tax consequences — always get professional advice.
Read the rest of our complete guide to buying a business in Canada, or work through the due diligence checklist you'll complete before the structure is finalized.
This guide is general information, not legal, tax, or financial advice. Deal structure and tax consequences vary — always consult a qualified lawyer and accountant.
Structure is usually first proposed in the letter of intent, after you have signed an NDA and before due diligence begins.
Download the asset sale vs. share sale due diligence checklist (PDF)
