Quick Answer
Buying a business in Ontario runs through seven stages: finding the target, the letter of intent, due diligence, the purchase agreement, financing, closing, and post-closing transition. Most deals move from LOI to close in two to four months, and whether you buy assets or shares shapes almost everything downstream.
The Buying Process
1
Find business
2
LOI
3
Due diligence
4
Agreement
5
Financing
6
Closing
7
Transition
The Complete Guide
OverviewBuying a Business: What to Expect
Deal SourcingAccessing the Best Deals
Term sheetLetter of Intent
StructureAsset vs. Share Purchase
DiligenceDue Diligence
ContractAsset Purchase Agreement
ContractShare Purchase Agreement
PricingWorking Capital
PricingEarnouts
FinancingVendor Take Back
SecurityPPSA Security
SecurityPersonal Guarantees
ClosingClosing Mechanics
ProtectionRestrictive Covenants
TransitionPost Closing IssuesComing Soon
RiskOwner Dependence
Frequently Asked Questions
Can I buy assets instead of shares?
Yes, and for most buyers of small and mid-sized businesses, buying assets is the more common structure. It lets you choose exactly which assets and liabilities come with you, and it generally gives you a cleaner starting point than inheriting a corporation's full history.
Should I incorporate first?
In most cases, yes, and before the purchase agreement is signed, not after. Buying through a newly incorporated company gives you liability protection and tax planning options that aren't available if you buy personally, and it's far simpler to set up before closing than to unwind afterward.
Can the seller finance part of the purchase?
It happens more often than buyers expect. A vendor take back is a loan from the seller for part of the purchase price, secured against the business, and it can bridge the gap between what a bank will lend and what the deal actually needs. It also tells you something about how confident the seller is in the business going forward.
How long does buying take?
Most deals move from LOI to close in two to four months. Straightforward asset deals with clean financials move faster, while deals involving real property, multiple shareholders, or complicated financing tend to take longer.
Do I need a lawyer before signing an LOI?
Yes. An LOI sets the framework for the entire deal, including price, structure, and exclusivity, and once it's signed, you've usually given up your ability to negotiate with other sellers. A short review before signing catches issues that are far harder to fix once diligence is underway.
What's the difference between due diligence and negotiating the purchase agreement?
Due diligence is the investigation phase, where you and your advisors verify the financials, contracts, and legal standing of the business. Negotiating the purchase agreement is where those findings get translated into contract terms, like price adjustments, representations, and indemnities, that protect you if something turns out to be wrong.
Who pays for due diligence?
The buyer typically pays for their own due diligence, covering legal, accounting, and any specialized reviews like environmental or IT. It's a real cost of buying a business, but it's also where problems get caught before you own them instead of after.
What is a working capital adjustment?
A working capital adjustment true's up the purchase price based on the actual level of working capital, cash, receivables, and inventory less payables, at closing compared to an agreed target. It protects buyers from inheriting a business that's been stripped of cash or inventory right before the sale, and protects sellers from being shortchanged if working capital is higher than expected.
Can I back out after signing an LOI?
Usually yes, but the cost of walking away depends entirely on how the LOI was drafted. Most LOIs are non-binding on price and structure but binding on exclusivity and confidentiality, so read the fine print before you sign, since exiting cleanly is much easier when the exit terms were built in from the start.
What should I do in the first 90 days after closing?
Focus on the transition items the purchase agreement locked in, like employee communications, customer and supplier notices, and any post-closing obligations to the seller. The first 90 days set the tone for how smoothly the business runs under new ownership, and most of the groundwork for that transition should already be mapped out before you close.