Buying a business with its building

Asset or share purchase

In an asset purchase you buy specific things: the land and building, equipment, inventory, the name, and goodwill. In a share purchase you buy the company that owns them, along with its history, contracts, and any liabilities. The tax, the transfer costs, and the risk are different. Your lawyer and accountant should help choose the structure before the offer, not after. Lenders may also have a view, because they lend against the real estate.

What is included

Write a list. Land and building, or only a lease. Equipment, owned or leased. Inventory, and how it is counted at closing. The business name, website, phone numbers, and supplier contracts. Customer deposits and gift cards. If it is not on the list, assume it is not included. Agree how inventory and equipment will be checked on closing day.

Value the two parts separately

Ask what the building would rent for if the business were gone. That gives you a market rent and a value for the real estate on its own. What is left of the price is what you are paying for the business. If the business only works when it pays itself no rent, that is worth knowing before you buy.

Licences, permits, and people

Many licences are issued to an operator, not to a building, and may not transfer on a sale. Liquor, food premises, and tourism licences are examples to ask about. Check with each licensing body whether you must apply in your own name and how long it takes. Ask your lawyer how PEI employment law treats existing staff on a sale.

GST/HST on the sale

In an asset sale, the buyer and seller may be able to file a joint election, Form GST44, so that GST/HST is not charged on the business assets. It has conditions, including that the buyer acquires all or substantially all of the property needed to carry on the business. Some items, including certain real property sales to a non-registrant buyer, are excluded. Ask an accountant.

Checklist

Before you firm up:

• Asset or share structure, chosen with advice
• Written list of included and excluded items
• Three years of business financial statements and tax returns
• Separate value for the real estate at market rent
• Licences and permits, and whether each one transfers
• Leases, supplier contracts, and equipment leases
• Employee obligations on a sale
• GST/HST election and transfer tax on the real estate
• Environmental and building reports on the property

Worked example: splitting the price

Illustrative example only. The figures are made up to show the method. They are not PEI market data or averages.

A café with its building is offered at $900,000. The building could rent to another tenant for $48,000 a year. If similar buildings trade at a cap rate the appraiser supports, say 7% for this example, the real estate alone is worth about $48,000 ÷ 0.07 = $685,700. The other $214,300 is the price of the business: equipment, name, and goodwill.

Now look at the café’s profit after paying itself that $48,000 rent. If little is left, most of the value is in the building, and the business is the riskier part of the price.

Sources

Checked October 2026. Rules change; confirm the current position before you rely on it.

• GST/HST Memorandum 14.4, Sale of a Business or Part of a Business, CRA (canada.ca)
• Form GST44, Election Concerning the Acquisition of a Business, CRA (canada.ca)
• GST/HST Memorandum 19.4.1, Commercial Real Property – Sales and Rentals, CRA (canada.ca)
• Real Property Transfer Tax Act, ss.3–5 (princeedwardisland.ca)
• Search the Contaminated Site Registry, Gov. of PEI (princeedwardisland.ca)