Buying a Business in BC: What You Need to Know
According to statistics, small businesses contribute to almost 98.1% of employer businesses in Canada. Suppose you want to own a business but don’t fancy all the start-up hassles. In this case, you can consider buying an existing business. British Columbia is a province that thrives on businesses of all sizes, and you can become a business owner there! But what is the process of buying a business in BC today?
So, we’ll tell you all you need to know, including how to find, evaluate, and buy your dream business in BC. But first, here’s an overview of the province’s business landscape.
British Columbia: A Thriving Business Haven
BC is a beautiful and exciting province to live and work in, with a diverse and dynamic economy that offers something for everyone. But before you start browsing the listings and making offers, you should get a feel for the lay of the land.
What are the primary industries and sectors in BC? How many businesses are there, and how are they doing? What are the perks and pitfalls of being an entrepreneur in this province?
Let’s start with the numbers. According to recent data, there are over 213,468 businesses in BC that have actual employees. In addition, BC’s economy spans various sectors, with professional services, real estate, construction, and retail trade leading the pack. These sectors house the most businesses and employ the most people among small enterprises. BC is also a significant player on the global stage, exporting goods primarily to the U.S., China, and Japan.
But it’s not all smooth sailing. Small businesses in BC face challenges like labour shortages, increasing costs, environmental regulations, and competition from online platforms. To thrive here, you’ll want to research and find a business that aligns with your ambitions, skills, and financial capabilities.
That’s where this guide comes in. Let’s take you through buying a business in British Columbia below.
How to Find Business Assets in BC
Now that you know more about BC’s thriving economy, it’s time to find those hidden gems – the lucrative business assets waiting to be discovered.
Step 1: Identify Your Industry
Identify the industry and the business you want to buy. Consider your skills, interests, experience, and goals when choosing a business that suits you.
This will help you create a buying criterion, which also means understanding the specific assets you value – be it advanced technological infrastructure, an established brand reputation, a devoted customer base, or a strategic physical location.
Step 2: Explore Businesses on Sale
Once you have a criterion, it’s time to start your business-buying hunt. For this, you can use different avenues like online business marketplaces. Examples like BusinessSellCanada offer extensive listings of businesses on sale. Such platforms provide detailed information and allow you to filter listings based on your preferences, making it easier to find potential matches.
Alternatively, you can also use business brokers. With their extensive local market knowledge and vast contacts, brokers can help identify opportunities that align with your criteria and provide expert advice throughout the buying process.
In addition, you can also identify a business to buy from your engagements. Networking plays a pivotal role in finding business assets. Participating in industry-specific events and local business groups or conversations with business owners in your chosen industry can open doors to opportunities that may not be publicly listed.
How to Buy a Business In BC
Once you have business assets that interest you, here is how to complete the buying process:
Step 1: Thorough Business Evaluation and Due Diligence
Evaluate the businesses based on factors like profitability, financial health, customer base, reputation, and location. Consider getting advice from a business advisor or accountant during this stage.
Also, conduct a more detailed investigation or due diligence if a business passes your initial evaluation. Here are some factors to investigate:
- Corporate records: Study the business’s incorporation documents, bylaws, minutes of meetings, shareholder records, etc.
- Contracts: Review all contracts, including supplier agreements, customer contracts, leases, and employment agreements.
- Compliance: Verify the business’s compliance with laws and regulations, including environmental, labour, health and safety, and industry-specific regulations.
- Intellectual Property: Check the ownership and validity of the business’s intellectual property, including patents, trademarks, and copyrights.
- Litigation: Investigate any current or potential legal disputes involving the business.
This step is critical for your business’s success if you buy the business. To prevent pitfalls up the road, you can hire a lawyer to review the documents with you.
Step 2: Start Valuation
Calculate the business’s fair market value. This can be complex and usually involves looking at the business’s financials, assets and liabilities, market conditions, cash flow, and future earnings potential. A professional business valuator can provide a detailed and accurate valuation for income tax purposes.
Step 3: Make an Offer
If you want to continue with the buy, make an offer to the seller. You’ll send the seller a Letter of Intent (LOI), a non-binding document that outlines your proposed terms of the deal. The terms should include the price you’re willing to pay, your payment method, and a timeline. Note that your seller can accept, reject, or negotiate your offer.
You can consult with your accountant and lawyer to determine whether you want to buy the shares or the assets of the business and the tax and legal implications of each option. Remember, the seller may want to negotiate for a better offer. If they do, ensure you iron out the purchase price and payment terms based on your valuation and due diligence.
Ideally, the LOI should also have confidentiality and exclusivity clauses, prohibiting the seller from sharing your offer or negotiating with other buyers for a certain period.
Step 4: Sign the Purchase Agreement
You’ll sign a purchase agreement once you and the seller agree on the terms. It is a vital legal document in the transaction and outlines the final terms of the deal, including:
- Assets and Liabilities the seller will transfer to you.
- Representations and Warranties: These are statements made by the seller about the condition of the business. If these statements are false, you can consider legal recourse.
- Indemnities: These are provisions where the seller agrees to compensate you for certain potential losses after the sale.
- Closing conditions: These must be met before the sale can be finalized.
It is ideal to have your lawyer draft or review the agreement to protect your interests and avoid any disputes or liabilities in the future.
Step 5: Regulatory Approvals and Third-Party Consents
Depending on the business and the industry, you may need approvals from government agencies. Also, contracts such as leases or customer agreements may require consent from other parties before the seller can transfer them to you.
Step 6: Close the Sale
This involves fulfilling any outstanding obligations or contingencies before the seller transfers ownership of the real property to you. For example, you may need to obtain financing, secure leases or licenses, register your business name or company, pay taxes or fees, etc. Ensure the seller gives you the necessary documents and records, such as the bill of sale, share certificates, inventory lists, etc.
Step 7: Post-Closing obligations
After the sale, there’s usually a transition period where the seller helps you get acquainted with the business operations. You may also have further legal obligations, such as:
- Notifying creditors of the sale
- Transferring licenses and permits
- Filing documents with government agencies
- Fulfilling any post-closing commitments outlined in the Purchase Agreement
Who Can Buy a Business In BC?
Before scouting for businesses on sale, you want to understand if you are eligible to buy or own a business in BC. While it is a straightforward process for Canadian residents, things can be different if you’re a non-resident. Let’s explore the following questions before you set out to the Lower Mainland:
a) Can You Buy a Business As a Non-Resident?
You can buy a business in BC even as a non-resident. Canada generally welcomes foreign investment – a vital contributor to the country’s economy. As long as you comply with Canadian business laws and regulations, there’s no restriction on non-residents owning a business. However, you may need to consider tax implications, immigration rules, and currency exchange costs.
b) Can Buying a Business in BC Secure a Visa?
Buying a business in Canada could help you secure a visa. However, there are specific requirements and programs that you need to meet and apply for. For example, in BC, there is the BC Provincial Nominee Program (BC PNP) Entrepreneur Immigration stream, which is a way for international entrepreneurs wishing to immigrate to BC to set up businesses that support economic growth and innovation in the province.
You can also sign up for the Start-Up Visa and Provincial Nominee Program (PNP). However, understand that you’ll only be eligible to work in the business or stay permanently in Canada after you get a Visa.
c) Can You Buy a Business in BC on a Visitor Visa?
While you can explore business opportunities, attend meetings, and even negotiate a business purchase on a visitor visa, the actual purchase of the business should ideally happen once you have the appropriate immigration status. The visitor visa doesn’t give you the right to work or conduct business activities in Canada, so you’ll need to upgrade to a business visa before running your business.
d) How Can You Get a Business Visa?
If you want to immigrate to BC, Canada, by starting a business and creating jobs, you may be eligible for the following:
- The Start-up Visa Program. This program is for innovative entrepreneurs who have the support of a designated organization, such as an angel investor group, a venture capital fund, or a business incubator. You must meet precise requirements, such as having a qualifying business, sufficient settlement funds, a letter of support from a designated organization, language skills, etc
- The Provincial Nominee Programs (PNPs), including the BC Provincial Nominee Program (BC PNP) Entrepreneur Immigration stream. You must meet specific requirements, including having a personal net worth of at least CAD$600,000. From this net worth, you’ll invest at least CAD$200,000 in an existing business in BC, creating at least one new full-time job for a Canadian citizen or permanent resident, etc.
Purchasing an existing business can be a smart option if you seek a small business opportunity in BC. You’ll benefit from a proven business model, loyal customers, and steady income.
However, you must also do your homework and be methodical to ensure you get a fair deal and avoid legal or financial issues. Our article has provided a step-by-step guide on buying a business in British Columbia, from finding a suitable business to closing the deal.
So, are you ready to step onto the entrepreneurial stage in BC? This is your best chance to leave your mark, create a legacy, and live the dream of owning a flourishing business in BC.
Featured Image by Corinne Kutz on Unsplash