Sale of Shares vs. Sale of Assets – A Look at Buyer and Seller Perspectives

January 8, 2016

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When a business owner decides to sell their incorporated company, they have two options for the sale: selling the company by way of shares, or selling the assets of the company.


In general, selling business owners (“Seller”) often prefer selling a company by way of shares, whereas a purchaser of the business (“Buyer”) often prefers purchasing the assets of a company. The below summarizes some of the key considerations leading to the transaction preferences for each side.

Sale of Shares


  • Assuming the proceeds from the sale exceed the adjusted cost base of the Seller’s shares, the proceeds are taxed as capital gains, of which only 50% are included as income for tax purposes.
  • Potential additional benefit for Seller if the company is recognized as a qualified small business corporation. The Seller could apply their lifetime capital gains exemption (up to $800,000), which would effectively reduce the taxes otherwise payable on the capital gains on the sale of the company’s shares.
  • Buyer may benefit from certain advantages from share purchase, such as being able to use the purchased company’s non-capital tax loss carry forwards against future income earned (subject to certain restrictions).
  • Buyer may also benefit from potential savings in not having to pay sales and property transfer taxes on certain assets owned by the company.

Potential Liability 

  • Buyer is exposed to potential unreported liabilities in the company, including additional tax liabilities from tax reassessments, undisclosed liabilities or contingent liabilities, such as lawsuits.

Degree of Complexity

  • Less complex because there is only a transfer of shares between one party to another.
  • However, Buyer would want additional due diligence performed on the company to reduce risk.

Sale of Assets


  • The Seller faces two potential levels of tax from asset sale:
    • Tax paid by corporation as result of sale of assets (e.g., recapture and capital gains).
    • Tax paid by Seller personally as proceeds are taken out of the company.
  • In other words, Seller may pay more taxes selling assets in a corporation than from selling the shares once proceeds flow through to the seller.
  • Buyer may be required to pay property transfer tax on real property, such as buildings and permanently affixed equipment.
  • Buyer is able to take advantage of having higher future tax deductions from the capital cost allowance on depreciable property if the purchase price of the asset is higher than the undepreciated capital cost of the asset in the company.

Potential Liability 

  • Buyer is able to designate assets for future operations and avoid any potential liabilities that exist in the corporation.

Degree of Complexity

  • More complex because a sale of assets require more documentation, including transfer papers and third party consent forms.
  • Certain licenses and permits are not transferable.

Depending on various factors, including the negotiating abilities of the Buyer and Seller, the price ultimately determined for the sale of shares and for the sale of assets may not be significantly different from each other.

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