Selling a business that owns or leases its real estate in BC

Owners selling a business in BC that either owns its premises (say, a machine shop that owns its building in Coquitlam) or leases them (a restaurant on a long lease in Kitsilano), and the family members or advisors helping them.

• Decide early whether you're selling shares or assets. It changes tax, Property Transfer Tax (PTT), Goods and Services Tax (GST) and whether the landlord has to consent. See Share sale and Asset sale.
• If you lease, the lease may be your most valuable asset. Read the Assignment (lease) and Change of control clauses before you list.
• If you own, you can sell the building with the business, keep it and lease it to the buyer, or sell it separately later.
• Buyers value the business on earnings, often using earnings before interest, taxes, depreciation and amortisation (EBITDA) or Seller's discretionary earnings (SDE), and the property on its own merits.
• Get your accountant and lawyer involved before you set a price.

Step 1: Pick your structure

Lifetime Capital Gains Exemption (LCGE). It can shelter part of the gain when you sell qualifying small business shares (not assets), and your accountant confirms whether you qualify.

In a share sale, the buyer takes over the company, including its history. In an asset sale, the buyer picks the assets it wants. Buyers often prefer assets; sellers often prefer shares for tax reasons. Your accountant can model the difference, including the Capital gains / LCGE and Recapture of capital cost allowance (CCA) effects.

The Canada Revenue Agency (CRA) handles federal tax. See CRA: capital gains deduction and CRA Guide T4037: Capital gains.

Step 2: Sort out the real estate

If you lease: check how much term is left, renewal rights and what the landlord needs to approve a transfer. Talk to the landlord early. A buyer can't finance or plan without knowing the lease is secure.

If you own: decide whether to sell the property with the business, keep it and become the buyer's landlord, or sell it separately. Keeping it can give you income and a stronger price for the business, but you stay a landlord. See Sale-leaseback.

Step 3: Get your numbers ready

Prepare clean financial statements, adjusted earnings, a list of assets, leases and contracts, and a summary of the property. A tidy data room speeds things up and builds trust.

Step 4: Market and negotiate

Keep the sale confidential with a Non-disclosure agreement (NDA) / confidentiality agreement (CA). Screen buyers for financing and experience.

Negotiate price, structure, Purchase price allocation, Non-competition agreement terms, transition help and any Vendor take-back (VTB).

Step 5: Close

Your lawyer handles the share or asset purchase agreement, the lease assignment or new lease, the transfer of property if included, and tax filings. If GST applies, ask whether the GST going-concern election can be used. See Excise Tax Act (Justice Laws).

Taxes to plan for

• Income tax on the sale, including capital gains and recapture.
• PTT when real property is transferred. A share sale generally doesn't trigger PTT, but there are reporting rules and exceptions, so get advice. See Property transfer tax (Government of BC).
• GST on asset sales, unless an election applies.
• Provincial Sales Tax (PST) clearance may be required on an asset sale. See Provincial sales tax (Government of BC).

Opco, propco, and consent timing

When the operating company and the property company are separate, buyers need a map: what is selling, what lease sits between them, and which landlords or lenders must consent. Goods and Services Tax elections and Lifetime Capital Gains Exemption questions belong with your accountant.

Critical dates should include consent chains, not only the share purchase agreement.

I help keep the real estate file aligned with the business deal.