Assets or shares: the books follow the deal
Everything about the accounting after closing flows from the transaction structure, so start by being precise about which deal you actually did. In a share purchase you bought a corporation, and the corporation never stopped existing: its ledgers, its business number, its HST and payroll accounts and its banking all continue, with you as the new owner. In an asset purchase you bought things, a customer list, equipment, inventory, a name, and those things now live inside your own corporation, which starts its accounting life from a blank page and the closing statement.
| Item | You bought shares | You bought assets |
|---|---|---|
| The books and history | Continue; the history is now yours, errors included | Stay with the seller; you start fresh |
| Business number and CRA accounts | Unchanged; you update directors and authorize your accountant | New corporate tax, HST and payroll accounts under your corporation |
| Payroll | Same employer, uninterrupted | You become a new employer; staff are re-onboarded onto your payroll |
| HST | Same registration keeps filing | New registration; the closing itself is usually covered by a joint election |
| Tax year | Deemed year-end at the change of control, then a short year | You choose the first year-end, up to 53 weeks out |
| Opening balance sheet | Carries over, adjusted for the working capital peg true-up | Built from scratch off the purchase price allocation |
If you are not sure why the deal was papered the way it was, the trade-offs are laid out in our comparison of an asset purchase versus a share purchase. For the rest of this page, the structure is the fork every answer branches from.
The first 90 days: accounts, payroll, HST and access
The immediate work is administrative, unglamorous and unforgiving of delay. In an asset deal, your corporation needs its CRA program accounts open before the first payroll run and the first taxable sale: corporate tax, HST, and payroll, plus WSIB registration where the industry requires it. In a share deal the accounts already exist; the work is updating directors and addresses, authorizing your new accountant on the accounts, and getting control of online access the seller may not remember holding.
Payroll is where new owners most often stumble. In an Ontario asset sale, employment standards treat service with the seller as continuous for entitlements like vacation and notice, even though you are a brand-new employer for remittance purposes, so your payroll setup has to carry the old hire dates while remitting under the new account. Ask, before the first remittance, whether successor-employer treatment applies to the CPP and EI already withheld that year, so employees and the company are not double-paying maximums. In a share deal none of this arises; the employer never changed.
Two more items belong in the same fortnight. First, cut-off: receivables and payables that straddle closing must land on the right side of the line the purchase agreement drew, because the seller collecting your receivable, or you paying their payable, is a real-dollar dispute waiting to happen. Second, data access: bank feeds, the accounting file, point-of-sale history and payroll records. If the asset purchase agreement did not secure historical data, negotiate access now, while goodwill is fresh, because your comparatives, your pricing history and your CRA audit trail live in it.
Your opening balance sheet is a tax document, not a formality
The opening balance sheet sets tax outcomes for years, so it deserves more care than a bookkeeping entry. In an asset deal, the purchase price allocation agreed in the deal becomes the cost of each asset class in your books: equipment starts depreciating at what you paid for it, inventory enters at its allocated cost, and goodwill lands in its own intangible class and gets deducted gradually over many years. The allocation was a negotiation, since the split that helps you generally costs the seller, and your books must follow what was signed, not what would have been convenient.
In a share deal, the balances carry over, but the tax file takes a sharp turn: the acquisition of control triggers a deemed year-end immediately before closing. That means a short taxation year with its own T2 return on a deadline, depreciation prorated for the stub period, and restrictions on the losses the corporation was carrying: net capital losses expire, and non-capital losses survive only against income from the same or a similar business. There is one genuine consolation, which is that the corporation can choose a new year-end going forward without asking CRA. The working capital peg then gets trued up months after closing, and the adjustment flows through your opening numbers, so keep the file open until it settles.
This is also the moment the acquisition stops being a projection and starts being actuals. The due diligence file you built before buying is the baseline your first real months get measured against, and the gaps it flagged, undercollected receivables, thin margins in one product line, are the first things your new books should be set up to track.
Lender reporting starts the month after closing
If the purchase was financed, and most are, your accounting now has an external audience with a deadline. The commitment letter you signed sets out lender reporting: year-end financial statements at a prescribed level of assurance, often interim statements quarterly or monthly, and a debt service coverage covenant tested on your actual numbers. Miss the deadlines or the covenant and the consequences run from awkward conversations to frozen seller payments under a subordination agreement, with your personal guarantee in the background.
That audience changes how the books should be kept from day one. The chart of accounts should be built so covenant math falls out of the statements rather than being reverse-engineered every quarter. The monthly close needs to be real, not a year-end scramble, because a covenant tested on stale numbers is a covenant you learn about breaching late. And the cash flow forecast from the financing package should stay alive as the budget you compare actuals against, since the variance story is what your banker actually wants to discuss. Where the statements need to be compiled by a CPA to satisfy the lender, that is our compilation work; the level of assurance is the bank choice, not yours, so read the commitment letter before assuming.
What changes the answer, and how we take the books over
The first year of ownership goes very differently depending on a short list of facts:
- Asset or share deal. The fork everything else follows: fresh accounts and a chosen year-end, or continuity plus a deemed year-end and loss restrictions.
- The state of the seller records. Clean monthly books transfer knowledge; a shoebox transfers risk.
- Whether staff came with the business. Payroll continuity, vacation accruals and source deduction timing all turn on it.
- What the lender requires. Statement level, reporting frequency and covenants shape the whole accounting cadence.
- Whether the HST election was filed properly at closing. A missed joint election on an asset deal surfaces as an expensive surprise later.
- The working capital true-up. Until the peg settles, your opening numbers are provisional.
Most buyers hand this over rather than learn it under deadline, and that is the sensible call. We take over or build the books, open the right accounts in the right order, set the chart of accounts around your lender covenants, and run the monthly close, payroll and reporting as one team through an Ongoing Financial Partnership. The wider money side of the deal, including the business financing packages and projections we prepare as an Ontario CPA firm, is covered in our guide to buying a business in Canada, and a free 15-minute discovery call is how every engagement starts.
Source: Ontario — Employment Standards Act, 2000, S.O. 2000, c. 41.
