First commercial Property

[jimcurran]

I'm in the offer stage of a commercial property after selling all my residential property this year. I'm looking at a short term rental commercial property and wondering what conditions would be applicable to the business purchase? I understand the property itself and feel confident in the conditions related to that side of the deal. I'm looking for any thoughts or conditions on the business side from someone that might have experience with purchasing the business. It is being sold as one (property and business) and really consists of a website they own and advertise on, social media accounts for the business, and contents related to the short term rentals (furniture, bedding, unit contents, etc). What types of conditions are typical when purchasing a business that I might not be aware of?

I've heard of non-resident sellers not paying capital gains and the buyer being responsible, HST, non competition clause, ?

Any thoughts are appreciated

 

[Thomas Beyer]

You need tax advice and an indemnity to any taxes owed.

A business purchase has far greater risk than the asset purchase as you also assume all liabilities for example past taxes owed or owing or lawsuits even if not yet filed.

Needs a far more complex purchase agreement AND an in-depth accounting review.

I’d offer to buy the real estate assets plus all assets that might interest you ie website, leads, chattels, lines, knives, toasters etc

You do avoid land transfer tax and HST though to my knowledge if you buy the shares but you need to look at their books and tax filings for at least 3 years AND you need an indemnification for any legal claims or taxes owed prior to you buying it !!


Thomas Beyer, Asset Manager & Improver, Hard Asset Investor & DeFi Asset Hodler, Author, Father, Mentor, Hiker, Kayaker www.prestprop.com

 

[Martin1968]

Not completely clear what you mean. A business purchase can either be a share sale or an asset sale. In case of the first one, See Thomas’ answer on risks involved. In case of the second, very straightforward. Good lawyer is recommended and will take care of all, even the smallest details
Only other thing if it is indeed a full blown AirBnB is maybe a competition clause? What would stop the current owners from opening up a competing bizz a block away from you etc. Goodluck.

 

[Thomas Beyer]

Be mindful that a share sale implies that you are also liable for capital gains of the assets within the corporation and an accountant has to advise you how much that is.

As such detailed tax statements of the selling corporation are paramount. It makes the due diligence longer and more expensive. The purchase price ought to be lower too to account for it.

If strict asset sale then don’t overpay for “the business” ie the website. That’s worth little, and it’s tough to finance.


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[Devin Roberts]

Hey Jim, feel free to reach out. Would love to discuss in detail


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[Ivan Sabourin]

Hi Jim,
Just want to put my input in... well cause I can and nobody cares

You seem a little confused in what you are buying... If you are doing this "investment" thing... then that should be your business. Don't buy commercial properties to assume somebodies retail business. A little secret - that retail business that you are buying directly controls the value of the property you are buying. Hope you understand this point.

You either work the investment company or you work the retail business... you can't be 100% at two things.

If I was looking at this deal... it would be property value only and if the business was part of the deal, then I would consider the business as closing ... meaning the property is vacant and the property value would have to adjust accordingly.