Share deal or asset deal decides what you inherit
Sellers push share sales because qualifying shares can claim the lifetime capital gains exemption. Buyers lean toward assets, because a corporation's whole history travels with its shares: tax years still open to reassessment, old HST positions, employee obligations, and, for a dry cleaner, everything its solvents ever touched. Neither answer is automatic. The point is to know exactly what each form of the deal hands you, and to price it.
| Question | Share purchase | Asset purchase |
|---|---|---|
| What you acquire | The corporation, history included | Machines, lease, name and goodwill, chosen line by line |
| Machine deductions | Seller's remaining undepreciated cost carries on | CCA restarts on the allocated purchase price |
| Past liabilities | Travel with the shares | Mostly stay behind with the seller |
| HST on closing | None on the shares themselves | Often relieved by a section 167 election on form GST44 |
| Seller's motivation | Capital gains exemption on qualifying shares | Recapture and income, so usually a higher asking price |
Where the building should live
When the real estate comes with the deal, resist the urge to drop it into the same corporation that runs the machines. A separate corporation holding the building and renting to the operating company keeps the property out of reach of operating claims, and one day lets you sell the business while keeping the land, or the reverse. The structure still respects the exemption: a building used principally in the active laundry business counts as an active asset for the 90% test behind the $1.25 million exemption, while a building full of third-party tenants tilts the balance the wrong way. Financing follows structure too, since lenders mortgage the property company and lend against equipment separately, and our Business Financing Advisory work packages both sides for them.
Dry-cleaning history is a balance-sheet item
Perchloroethylene is the reason laundry deals attract environmental lawyers. PERC use is federally controlled under the Tetrachloroethylene (Use in Dry Cleaning and Reporting Requirements) Regulations, spent solvent and filter waste must leave the premises through licensed waste carriers, and any building that has ever housed a dry-cleaning machine should expect a lender to demand a Phase I, and often a Phase II, environmental site assessment before advancing a mortgage against it.
Incorporation shields your house from operating claims, but it does not un-contaminate soil, and buying the wrong structure can mean buying the problem. The corporate shield and the purchase diligence work together, and the recurring compliance costs, solvent tracking, disposal contracts, assessment reports, belong in the budget from day one rather than arriving as surprises in year three. This is the conversation to have before an offer, because it changes what you offer.
The mechanics, in the right order
The sequence matters more than the paperwork. Incorporate in Ontario or federally, with a NUANS search behind a named corporation. Open the CRA program accounts: RC for corporate tax, RT for HST, and RP for payroll the day the first attendant is hired. Register the RT account early even though the $30,000 small-supplier threshold technically buys time, because a working store crosses it quickly and the input tax credits on machines and buildout are only recoverable once you are registered. Then open the bank accounts before the first collection is deposited, so the corporation's money never routes through personal accounts, a habit that matters enormously in a cash business.
If you are already running the store personally, a section 85 rollover moves the business into the new corporation at cost, with no tax triggered on the way in, handled through our Corporate Restructuring work. Our Incorporation engagements cover the structure decision, the filings and the account setup, scoped and quoted in writing after a free 15-minute discovery call. Bring us the listing before you sign it: structure is far cheaper to set up than to repair.
