Glossary

Asset Sale

An asset sale is a transaction structure in which the buyer purchases specific assets of a business — equipment, inventory, customer lists, intellectual property, goodwill — rather than acquiring the shares of the corporation that owns those assets. The seller's legal entity (the corporation) remains in existence after the sale.

Buyers generally prefer asset sales because they avoid inheriting the seller's unknown corporate liabilities, can negotiate which liabilities to assume, and can write up the tax cost of acquired assets to fair market value, creating future depreciation deductions. Sellers generally prefer share sales because of the Lifetime Capital Gains Exemption (LCGE), which applies only to share sales, not asset sales.

In an asset sale, employees do not automatically transfer — the buyer typically offers new employment contracts. HST may be triggered on certain assets transferred, though the GST/HST going-concern election under the Excise Tax Act can exempt qualifying transfers.