Asset Sale vs Share Sale: What's the Difference When Buying a Business?

Asset sale vs share sale: the core differences

How the tax treatment actually diverges

The federal tax consequences are the clearest structural difference between the two deal types, because the Income Tax Act and Excise Tax Act treat them differently at almost every step.

In an asset sale, the purchase agreement typically allocates the total price among individual assets (equipment, inventory, goodwill, and so on). Where those per-asset prices are reasonable, the buyer can use them to calculate its CCA claims going forward, which resets the depreciable value of those assets to the price actually paid. Goodwill allocated in an asset sale is treated as depreciable property under CCA Class 14.1.

In a share sale, the corporation itself does not change hands in an asset sense: it is a separate legal entity that continues to own its property before and after the transaction. A change in who holds the shares does not affect the tax cost base of the assets the corporation already owns, so there is no step-up (or step-down) in asset values the way there is with an asset sale.

GST/HST tracks the same divide. Buying shares is generally not subject to GST/HST at all. Buying assets generally is, unless the buyer is acquiring at least 90% of the property reasonably necessary to carry on the business, in which case the buyer and seller can jointly elect on Form GST44 to have no GST/HST payable on the sale.

For an individual seller, the share sale route also opens the door to the lifetime capital gains exemption on qualifying small business corporation shares (a 2025 limit of $1,250,000 in gains, giving a maximum $625,000 deduction). That exemption is generally not available when the seller is the corporation disposing of its own assets rather than the individual disposing of shares.

Employee continuity applies either way, in Ontario and Alberta

A common misconception is that an asset sale lets a buyer treat the workforce as a clean slate. It does not, in either province, if the buyer keeps employees on.

In Ontario, the Employment Standards Act, 2000’s continuity-of-employment provision (s 9) exists precisely because employment would otherwise restart with a new employer in a business or asset transfer. Where the buyer continues to employ people who worked for the seller, the buyer must credit their prior length of service, which affects entitlements like termination notice that are calculated on service length. The purpose of the provision is specifically to preserve recognized service when a business changes hands and the employee is kept on.

Alberta has a parallel rule under the Employment Standards Code: when a business changes ownership and an employee continues working for it, the employee retains all previous length of service. This applies regardless of whether the ownership change was structured as an asset transfer or otherwise, as long as the employee keeps working for the business.

Because this obligation attaches to continued employment rather than to the deal structure, choosing a share sale over an asset sale does not avoid it, and choosing an asset sale does not avoid it either.

Which structure fits: decision points, not a winner

There is no single correct answer here; the facts above point to specific, checkable criteria rather than a general preference.

• Depreciation planning. If stepping up the tax cost base of specific assets for future CCA claims matters to the buyer, an asset sale is the structure that allows per-asset price allocation for that purpose.
• GST/HST exposure. Either structure can avoid GST/HST: a share sale is generally exempt outright, while an asset sale can be brought to the same result through the joint election on Form GST44, provided the buyer is acquiring at least 90% of the necessary business property.
• Seller’s exemption planning. If the seller is an individual holding qualifying small business corporation shares and wants access to the lifetime capital gains exemption, that benefit is tied to a share sale, not an asset sale.
• Workforce obligations. Continuity of service for employees who are kept on applies under both Ontario’s and Alberta’s continuity-of-employment rules regardless of which structure is chosen, so this factor does not favour one structure over the other.
• Transferability of the shares themselves. In Alberta, before committing to a share purchase, a buyer needs to confirm whether the corporation’s articles or a unanimous shareholder agreement restrict share transfers, since such restrictions can block or condition the transaction.

Buyers and sellers weighing these points typically work through them with an accountant for the tax allocation and GST/HST election mechanics, and with counsel for the share-transfer restrictions and employment continuity obligations that apply in the province where the business operates.