Selling a commercial business in New Brunswick involves choosing between an Asset Sale and a Share Sale. The process requires a professional valuation, a formal Letter of Intent (LOI), and extensive legal due diligence. Depending on the complexity, legal and accounting fees generally range from $5,000 to $15,000 CAD.
Building a successful business takes years of intense labour and dedication. When the time comes to finally sell your commercial enterprise and move on to your next chapter, the legal transition must be handled flawlessly. A poorly structured sale can result in massive tax liabilities with the Canada Revenue Agency (CRA) or unexpected lawsuits from the buyer years after the deal has closed. Whether you are selling a bustling restaurant in Dieppe, a manufacturing plant in Saint John, or a professional practice in Fredericton, careful preparation is paramount.
This detailed commercial guide explains exactly how to sell a business in New Brunswick. We will explore the critical differences between selling your assets versus selling your corporate shares, how to safely navigate the due diligence phase, and why retaining a local business law firm is your best defence against legal risk.
Step-by-Step Process to Sell a Business in New Brunswick
Selling a business is far more complex than selling real estate. It involves transferring intellectual property, employee contracts, and potentially hidden liabilities. Here is the standard step-by-step process most entrepreneurs follow in the province.
Step 1: Conduct a Professional Business Valuation
Before listing your business, you must determine its true, objective market value. You cannot simply guess the price based on how much money you invested over the years. You should hire a Chartered Professional Accountant (CPA) or a Certified Business Valuator (CBV) to conduct a thorough financial analysis.
They will meticulously review your last three to five years of financial statements, physical inventory, real estate holdings, and intangible assets like brand reputation and client lists . A formal valuation report provides you with the solid leverage needed to defend your asking price against aggressive buyers.
Step 2: Choose Between an Asset Sale or a Share Sale
If your business is a registered corporation, you have two primary legal methods to sell it. In a Share Sale, the buyer purchases the actual shares of the corporation, effectively inheriting everything-including the company’s past legal history and liabilities. Sellers generally prefer this method because it often qualifies for the Lifetime Capital Gains Exemption (LCGE) through the CRA.
In an Asset Sale, the buyer only purchases specific items, such as equipment, inventory, and customer lists, leaving the empty corporate shell behind 📦. Buyers heavily prefer asset sales because they can strictly avoid hidden corporate liabilities (like pending lawsuits or unpaid taxes) and can depreciate the newly acquired assets faster.
Step 3: Draft an NDA and a Letter of Intent (LOI)
When a serious buyer emerges, you must protect your confidential data. Before revealing sensitive financial documents or client lists, your lawyer must draft a strict Non-Disclosure Agreement (NDA). If the buyer remains interested, they will present a Letter of Intent (LOI).
The LOI is a preliminary, mostly non-binding document that outlines the proposed purchase price, the timeline, and whether it is an asset or share sale . While not the final contract, the LOI sets the strict legal framework for the entire transaction.
Step 4: Due Diligence and the Purchase Agreement
Once the LOI is signed, the buyer enters the “due diligence” phase. Their lawyers and accountants will deeply investigate your business, checking for unpaid WSIB/WorkSafeNB premiums, outstanding tax liens, or restrictive commercial leases.
If the buyer is satisfied, your business law firm will draft the final Purchase and Sale Agreement. This binding legal contract details the exact transfer of funds, how current employees will be handled, and usually includes a non-compete clause preventing you from opening a similar business nearby.
| Feature | Asset Sale | Share Sale |
|---|---|---|
| What is Sold? | Specific items (equipment, goodwill, inventory). | The entire corporation (shares). |
| Buyer Risk | Very low. Leaves past liabilities behind. | High. Inherits all past corporate history. |
| Tax Advantage | Better for the buyer (depreciation). | Better for the seller (Capital Gains Exemption). |
How Much Does it Cost in New Brunswick?
Selling a commercial enterprise involves significant professional fees, but attempting to cut corners can cost you hundreds of thousands in taxes or legal damages:
- Business Valuation: A formal appraisal from a certified valuator typically ranges from $2,000 to $5,000 CAD, depending on the business size.
- Commercial Broker Fees: If you use a business broker to find a buyer, they usually charge a commission of 8% to 12% of the final sale price.
- Law Firm Fees: Retaining a local corporate lawyer to negotiate the LOI, manage due diligence, and draft the massive Purchase Agreement generally costs between $5,000 and $15,000 CAD.
- Corporate Registry Updates: Filing formal changes to directors or dissolving the corporation with Service New Brunswick (SNB) involves minor filing fees of roughly $50 to $100 CAD.
How Long Does the Process Take?
Selling a business is rarely a fast transaction. Preparing the business for sale and finding a qualified buyer can take 6 to 12 months. Once a Letter of Intent (LOI) is signed, the legal due diligence phase and drafting the final Purchase Agreement typically takes an additional 60 to 90 days. Complex transactions involving environmental assessments or transferring commercial real estate leases can easily extend the timeline beyond a year.
Frequently Asked Questions (FAQ)
Do I have to fire my employees when I sell?
It depends strictly on the structure. In a Share Sale, the corporation is the employer, so employment continues uninterrupted. In an Asset Sale, the seller technically terminates the employees, and the buyer may offer them new contracts.
Will I have to pay capital gains tax?
Generally, yes. However, if you sell the shares of a Qualified Small Business Corporation (QSBC), you may be entitled to the Lifetime Capital Gains Exemption, which can shelter over $1 million CAD from CRA taxation.
What happens to my commercial lease?
Your current landlord must explicitly approve the transfer (assignment) of the lease to the new buyer. If the landlord refuses, the entire sale could collapse, which is why reviewing your lease is a critical early step.
Can the buyer force me to sign a non-compete?
Yes. Almost all commercial buyers will strictly demand a restrictive covenant (non-compete clause) in the purchase agreement, preventing you from opening a competing business within a certain geographical radius for a few years.
What if the buyer finds hidden debts after the sale?
The Purchase Agreement will contain “Representations and Warranties.” If you lied or hid debts, the buyer can sue you for breach of contract at the Court of King’s Bench to recover their financial losses.
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