This is the first in a series of blogs I’ll be writing about buying and selling health businesses in Ontario.
So let’s start with the basics, shall we? What kinds of business am I talking about? Well, these businesses are as follows:
- Doctor office
- Dental office
- Medical lab
- Physiotherapist office
- Chiropractor office
So if you’re looking to buy or sell one of these types of business, then you’re in the right place…Keep reading.
If you’re looking to BUY, here are some things you should be aware of:
Perhaps most importantly, you’ll want to buy assets and avoid buying liabilities. You can never guarantee that you’re buying only assets without hidden liabilities. So you’ll want to push back against demands to buy all the shares of an existing corporation or the equity interest in a partnership. You want assets, plain and simple! If you’re buying a corporation’s shares, then you get everything: assets and liabilities.
Next, you should have an accountant on hand to help you go through the accounting side of things. If you do end up buying assets, you’ll be purchasing them for a certain amount. If the assets are capital property and qualify under the Income Tax Act for a capital cost allowance deduction, then you can deduct a certain percentage of what you paid for the asset every year until there is nothing left.
If you’re looking to SELL, here are some things you should be aware of:
If you have a Canadian-controlled private corporation earning active business income, then you may be eligible to sell the shares and pay little or no taxes on any resulting capital gains. Take the following example: if you paid the corporation $1 for 1 share (thereby making you the sole shareholder of the corporation) and then sold that 1 share for $100,000, you would have a capital gain of $99,999 – half of which would be taxable as at your full tax rate. But if the shares you sold are from a CCPC earning active business income, then you get a lifetime capital gains exemption to pay $0 taxes on up to a certain limit (currently $375,000 taxable capital gains). Therefore, if you’re the seller, you will want to sell the corporate shares and experience significant tax savings.
Be sure to stay posted as I will be getting into more nuances about buying/selling a health practice in additional blogs.
Remember: if you’d like to retain me to advise you and facilitate a purchase/sale of a health practice, contact DMC LLP today.