Asset and Location Considerations when Purchasing a Business in Canada

Deciding whether to start or purchase a business in Canada (and in which industry) is likely one of the most important decisions you will ever make. Below is a list of asset and location-related questions to ask and issues to consider when going through this decision-making process.

  1. What are the assets of the business or the items of value to you (e.g., customer lists, intellectual property, goodwill, key equipment, etc.)? Do you have a complete list of the assets? Which assets are not for sale and why? Have the assets/equipment in question been appraised to determine their value in Canada vis á vis the purchase price?
  2. If you are not buying the entire business (i.e., you buy specified assets such as machines or trucks), what investment is required before you can make the business "whole"? How much investment in terms of capital and labour will you have to invest before it can be a "complete business" as you envision? Can you afford the investment of time and resources?
  3. Are the assets primarily tangible or intangible assets? If tangible (e.g., equipment and inventory), are they modern and in good condition?
  4. Has the business protected its intellectual property by using trademarks, patents and copyrights?
  5. How sensitive is the business to an industry and/or economic downturn? What can be done to cushion such risks (i.e., can the business' assets and resources be utilized in another manner to generate revenue if the core business is suffering from a downturn)?
  6. Do you want to continue operating the business at the current location? What are the terms and conditions for remaining at the current location in Canada, and how do these terms impact your ability to proceed with the acquisition?
  7. What proportion of the value of the business is tied to its specific physical location? If you are required to move locations does the value of the business diminish significantly or is the value transferable to different locations in Canada or elsewhere?
  8. Is the property in which the business operates leased? If so, what is the term of the lease? Is the rent reasonable or should you consider having it re-negotiated prior to closing? Is the lease in good standing? Are there any renewal rights at the expiry of the lease? Can you negotiate additional renewal rights or an extended term as part of the transaction and if so, at what rent?
  9. Have you asked other business owners in the area (geographic/industry) about their thoughts on the business and the general economic viability of the area/business/industry?

Brooks Barristers & Solicitors is a boutique business law firm located in Toronto, Ontario specializing in serving the needs of entrepreneurs, privately-owned Canadian businesses and their principals.

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