Published 29 September 2026 · By Jatin Dua, Broker of Record, RE/MAX Quantum Realty
For most restaurant buyers an asset purchase is safer and a share purchase is simpler. In an asset purchase you pick the assets and leave the seller’s company, and its unknown debts and history, behind; the price attracts 13 percent HST unless you and the seller make the section 167 election on Form GST44, and you can depreciate what you bought at current values, with goodwill in CCA Class 14.1 at 5 percent. The lease must be assigned and the AGCO licence transferred ($1,000). In a share purchase the company keeps its lease, licences and contracts, share purchases are generally not subject to GST/HST, but you inherit everything the company ever did, and an AGCO share transfer ($1,000) is still needed if you acquire 10 percent or more. The Canada Small Business Financing Program will not finance a share purchase. Your lawyer and accountant should make the call for your deal.
The two ways to buy a restaurant
In an asset purchase, your company buys the things the business uses: equipment, furniture, inventory, the name, recipes, phone number, website, social accounts and the right to take over the lease. The seller keeps its company, its bank account and its debts.
In a share purchase, you buy the shares of the company that owns the restaurant. Nothing inside the company moves; its owner changes. That means everything inside comes with it, good and bad.
Sellers often prefer shares for their own tax reasons, and buyers often prefer assets for protection. The seller’s view is in asset sale vs share sale for restaurants. This post is the buyer’s side.
Side by side
| Issue | Asset purchase | Share purchase |
|---|---|---|
| Past liabilities | Generally stay with the seller’s company, subject to your lawyer’s searches | Stay inside the company you now own |
| GST/HST on the price | 13% unless the s. 167 election (Form GST44) applies | Generally not subject to GST/HST (CRA) |
| Depreciation base | What you paid, allocated by fair market value | The company’s existing tax values carry on |
| AGCO liquor licence | Transfer to you, $1,000 | Share transfer if you acquire 10%+ of shares or new officers/directors, $1,000 |
| Toronto business licence | You apply for your own | Ask the City; the licence holder has not changed but its owners have |
| Lease | Assignment, needs landlord consent | Often needs consent under a change-of-control clause |
| Employees | ESA s. 9: service with the seller counts if you employ them | Employer does not change |
| CSBFP financing | Eligible, including goodwill in a going-concern purchase | Not eligible |
Sources: CRA, AGCO, O. Reg. 746/21, Employment Standards Act, ISED. Summaries only; your lawyer and accountant must confirm for your deal.
Liabilities: the main reason buyers prefer assets
A restaurant company can carry things no one mentions: an old tax reassessment, a supplier claim, an employee complaint, an unpaid penalty. Buy the shares and those stay with the company you now own. Buy assets and they generally stay behind.
That protection is not automatic. Ontario repealed its Bulk Sales Act on 22 March 2017, so there is no statutory procedure for clearing the seller’s creditors. Your lawyer searches the Personal Property Security Registration system ($8 per online search) for lenders with security over the equipment and directs payouts from your funds at closing. On a share purchase, you rely on the seller’s representations, warranties and indemnities, and sometimes a holdback, instead.
HST and the section 167 election
Ontario’s HST is 13 percent. On an asset purchase it applies to the taxable assets unless the buyer and seller jointly elect under section 167 of the Excise Tax Act, using Form GST44. CRA’s conditions:
- you acquire all or substantially all of the property needed to carry on the business, which CRA reads as at least 90 percent by fair market value;
- if the seller is a GST/HST registrant, you must be one too;
- the form is filed by the due date of your return for the first reporting period in which tax would have been payable.
The election does not cover a taxable supply of services, property supplied by lease or licence, or real property sold to a non-registrant. On a share purchase, CRA says the purchase of shares is generally not subject to GST/HST. The seller’s version of this is in HST when selling a restaurant.
Depreciation: why buyers like a fresh cost base
In an asset purchase, CRA says the amount you attribute to each asset should be its fair market value, with the balance of the price going to goodwill, and your allocation should match the seller’s. That allocation drives your capital cost allowance:
| CCA class | Examples | Rate |
|---|---|---|
| Class 8 | Furniture, appliances, tools costing $500 or more | 20% |
| Class 12 | Kitchen utensils and tools costing less than $500 | 100% |
| Class 50 | Computer hardware and systems software | 55% |
| Class 14.1 | Goodwill | 5% |
Source: CRA, classes of depreciable property. Buyers usually want more of the price on equipment and less on goodwill; sellers often want the opposite. It is a negotiation, and it needs your accountant. In a share purchase, the company’s existing, often fully depreciated, values simply carry on.
Licences and the lease
Either way, the AGCO is involved. In an asset deal the liquor licence is transferred to your company for $1,000. In a share deal, O. Reg. 746/21 still requires a transfer when a person acquires 10 percent or more of the shares, or an officer or director changes, also $1,000. The licence’s conditions stay with it in both cases. See buying a restaurant with a liquor licence.
Toronto business licences are not transferable, so in an asset deal you apply for your own. For the lease, an asset deal needs an assignment and the landlord’s consent; many leases also treat a share sale as an assignment through a change-of-control clause. More in what buyers must check in a restaurant lease.
Financing and price
The structure affects your lender. The Canada Small Business Financing Program finances going-concern asset purchases, including goodwill and franchise fees as intangibles, but ISED says the acquisition of shares is not eligible. A seller who insists on a share sale may need to accept a lower price, or finance part of it.
Whatever the structure, test the price against verified earnings with the tool below.
The AI restaurant valuation tool below gives you a price range from the numbers a seller should be able to show you, so you can test an asking price before you make an offer.
Where I fit
I help buyers across Toronto and the GTA compare the two structures on a real listing, with the lease, licence and financing in view, and I bring in your lawyer and accountant before the offer is signed. For the full sequence see buying a restaurant step by step. To talk it through, book a call or phone 833-330-1925.
Free tool — AI restaurant valuation
Restaurant valuation
What is your restaurant
actually worth?
Restaurants don’t sell on revenue — they sell on what the owner takes home, multiplied by how easy the business is to hand over. Your lease and your rent do more damage or more good than anything on the menu. This weighs all of it in about two minutes.
Reading comparable restaurant sales…
Indicative business value
—
$0$0
Most likely sale price $0 · Implied multiple 0×
Where I’d list it
$0
Comparable restaurants sell for about 85% of asking. Price to that, not to hope.
How the number is built
Your owner earnings, multiplied by what buyers pay for a business like yours — then adjusted line by line.
What the market pays
Benchmarks from completed restaurant sales.
What a buyer will ask for
- Three years of financials — statements and tax returns, not just POS reports.
- The lease, with the assignment clause and every option in writing.
- Proof of your add-backs. Lenders reject the ones you cannot document, and that is the single biggest reason deals reprice.
- Equipment list showing what is owned outright and what is leased or financed.
- Licences — AGCO, food premises, patio, and whether each one transfers.
- WSIB, HST and payroll accounts in good standing.
Want the number a buyer
would actually sign?
Send me three years of financials and your lease and I will price it properly — normalised earnings, real comparables, a defensible asking price and a confidential marketing plan that never tips off your staff or your landlord.
Frequently asked questions
Is it better to buy restaurant assets or shares?
For most buyers an asset purchase gives more protection from the seller’s past debts and a fresh depreciation base, while a share purchase keeps the lease, licences and contracts in place and is generally not subject to GST/HST. The right answer depends on the deal, so decide with your lawyer and accountant.
Do you pay HST when buying a restaurant’s assets in Ontario?
Yes, 13 percent on taxable assets, unless the buyer and seller make the section 167 election on Form GST44. The buyer must acquire at least 90 percent of the property needed to run the business and, if the seller is registered, the buyer must be registered too.
Is there HST on buying shares of a restaurant company?
CRA says the purchase of shares of a corporation is generally not subject to GST/HST. The company’s own tax obligations, including any HST it owes, stay with the company you are buying.
Does a share purchase avoid the liquor licence transfer?
No. O. Reg. 746/21 requires a licence transfer when a person acquires a beneficial interest of 10 percent or more of the shares, or when officers or directors change. The AGCO fee for a share transfer is $1,000.
How is goodwill taxed for a restaurant buyer?
In an asset purchase, goodwill is the price left after allocating fair market value to each asset and inventory. It goes into CCA Class 14.1 at 5 percent a year. Equipment in Class 8 is depreciated at 20 percent, so the allocation matters.
Can I get a small business loan to buy restaurant shares?
Not through the Canada Small Business Financing Program. ISED’s guidelines say the acquisition of shares is not eligible. Going-concern asset purchases are eligible, within the program’s limits.
Sources
- CRA — GST/HST Memorandum 14.4, Sale of a business or part of a business — section 167 election
- CRA — Buying a business — 90% test; share purchases generally not subject to GST/HST
- CRA — Form GST44 — election concerning the acquisition of a business
- CRA — GST/HST rates — Ontario 13%
- CRA — Buying an existing business — allocating the price; goodwill
- CRA — Classes of depreciable property — Class 8, 12, 14.1 and 50 rates
- O. Reg. 746/21 (Licensing) under the Liquor Licence and Control Act, 2019 — Part XI, ss. 154–158, licence transfers
- AGCO — Liquor licensing fees — transfer $1,000; share transfer $1,000; new licence from $925
- Toronto Municipal Code, Chapter 545, Licensing — § 545-5 E, licences non-transferable
- Employment Standards Act, 2000 — s. 9, sale of a business
- Bulk Sales Act, R.S.O. 1990, c. B.14 (repealed) — repealed 22 March 2017
- ISED — Canada Small Business Financing Program guidelines — $1,000,000 limit; shares not eligible
Related reading
- Asset sale vs share sale (seller's view)
- HST when selling a restaurant
- Buying a restaurant with a liquor licence
- Financing a restaurant purchase
- What buyers must check in a restaurant lease
- Buying a restaurant in Ontario step by step
About the author — Jatin Dua, Toronto and GTA real estate broker
I am Jatin Dua, Broker of Record and co-founder of RE/MAX Quantum Realty Inc., Brokerage, Unit 101, 799 The Queensway, Toronto. I work with buyers and sellers across Toronto and the GTA and have helped more than 100 families sell. Four-plus years of active GTA transactions and over $100 million in sales volume. Every figure here comes from a published table, regulator or statute linked in the sources, so you can check all of it without asking me.
Reach me at connect@jatindua.com or 833-330-1925, or book a call.