Buying a Business in Ontario: What Should Be Included in the Agreement

Buying a business is not just a financial transaction.

It is a legal and operational transfer of assets, obligations, and risk.

Most buyers focus on price and high-level terms. The agreement itself is often treated as a formality or something that can be finalized later.

In practice, the structure of the agreement determines:

• what you are actually acquiring

• what liabilities you are taking on

• what protections you have after closing

A poorly structured agreement can expose the buyer to risks that were never intended.

Start With What You Are Actually Buying

One of the first issues to clarify is whether the transaction is structured as an asset purchase or a share purchase.

This distinction matters.

In an asset purchase:

• specific assets are transferred

• liabilities can often be limited or excluded

In a share purchase:

• you acquire ownership of the company itself

• existing obligations typically remain with the business

Buyers often assume they are purchasing a “business” in a general sense.

The agreement defines what that actually means.

The Purchase Price Is Only One Part of the Deal

The purchase price is usually the headline number.

What matters just as much is how that price is structured.

This may include:

• deposits

• adjustments at closing

• holdbacks for potential claims

• earn-outs tied to future performance

We regularly see disputes arise not over the price itself, but over how it is calculated and paid.

Representations and Warranties Define Risk Allocation

Representations and warranties are one of the most important parts of the agreement.

They are statements made by the seller about the business.

These may cover:

• financial condition

• contracts and obligations

• compliance with laws

• absence of undisclosed liabilities

If these are too narrow, the buyer may have limited recourse after closing.

If they are too broad, the seller may push back.

This is where the balance of risk is negotiated.

Indemnities and Post-Closing Protection

Closely tied to representations are indemnity provisions.

These determine:

• when the seller is responsible for losses

• what types of claims are covered

• how long those obligations last

Without properly structured indemnities, the buyer’s ability to recover losses may be limited.

What Happens Between Signing and Closing

Many transactions do not close immediately.

There is often a period between signing the agreement and completing the transaction.

During this time, the agreement should address:

• how the business is operated

• what actions require buyer approval

• conditions that must be satisfied before closing

Without this, the business could change in ways the buyer did not anticipate.

Key Contracts and Assignments

Not all assets transfer automatically.

The agreement should address:

• which contracts are being assigned

• whether third-party consent is required

• what happens if a contract cannot be transferred

This is particularly important where the business relies on key relationships.

Employees and Operational Transition

The agreement should also address:

• whether employees are being retained

• how employment obligations are handled

• transition support from the seller

Operational continuity is often overlooked but critical.

Restrictive Covenants Protect the Value of the Business

Buyers often expect that the seller will not compete after the sale.

This is typically addressed through:

• non-competition provisions

• non-solicitation clauses

These need to be reasonable to be enforceable, but strong enough to protect the business.

What Happens If Issues Are Discovered After Closing

Even with due diligence, issues can arise after the transaction is completed.

The agreement should define:

• how claims are made

• any limits on liability

• time periods for bringing claims

Without this, recovery can be uncertain.

Where Transactions Often Go Wrong

We commonly see issues where:

• the structure of the deal is not clearly defined

• key risks are not properly allocated

• agreements rely on generic templates

• important details are deferred or assumed

These issues tend to surface after closing, when options are limited.

Book a Consultation

Buying a business involves more than agreeing on a price.

The agreement defines what you are actually acquiring, what risks you are taking on, and what protection you have after closing.

If you are in the process of acquiring a business or reviewing an agreement, it is worth addressing these issues early. A properly structured agreement can prevent significant issues after closing, and you can Book a Consultation to walk through your transaction and ensure it is structured properly.