Selling a trucking company in Canada

A trucking company is more than its trucks. A buyer is paying for steady customers, drivers who show up, a clean safety record and the permits that let the wheels turn on day one. Some of those do not move to a new owner on their own, and a few cannot move at all, so the way you structure the sale matters more than in most businesses. Here is what to expect and how to prepare.

What buyers look at first

Most buyers of a trucking or hauling company ask the same questions early. Have clear answers ready before you list:

• Sales and profit. Two or three years of numbers, with revenue and costs by truck if you can.
• Customers. Who you haul for, how much each one pays you a year, whether there are written contracts and how long they have been with you.
• Drivers. Who drives, how they are paid and whether they will stay.
• The fleet. Each truck and trailer, its age, kilometres, condition and what is still owed on it.
• Safety. Your certificate, rating, inspections, collisions and any audits.
• You. Whether you still drive, dispatch or hold the key customer relationships yourself.

Buyers will check these during due diligence, so it helps to gather them now. Our list of documents needed to sell a business is a good start.

Clean, matching numbers

Show revenue, fuel, repairs, insurance, driver pay and loan payments by month for the last two years, and by truck if your system allows it. Buyers like to see revenue per truck, cost per kilometre and how many kilometres each unit runs, because those tell them whether the fleet earns its keep. Make sure the totals match your bank deposits, your fuel tax returns and your tax returns, and that fuel surcharges are shown clearly.

Customer concentration is a big question in trucking. If one shipper is half your revenue, a buyer will worry about what happens if that customer leaves after you do. Written contracts, a long history and an introduction during the handover all help. If you drive or dispatch yourself, list your wage and any personal costs as add-backs with proof, and say what it would cost to replace your hours. If revenue has dipped with freight rates, explain why; see selling when sales are down.

Drivers, owner operators and Driver Inc.

Trucking companies often mix arrangements. Some drivers are employees on wages, by the hour or by the mile. Others are owner operators who own or lease their own truck and haul under your authority. Some are paid through their own corporation. A buyer will want a clear list of who is who, the written agreements and who plans to stay, because a fleet without drivers earns nothing.

The CRA uses the name Driver Inc. for drivers who work like employees but are paid as incorporated contractors. It says these setups can be personal services businesses, and that misclassification can lead to reassessments, penalties and interest. The CRA looks at the whole working relationship, including control over the work, who owns the truck and whether the driver has a real chance of profit or loss. If a status is unclear, sort it out before you sell or expect the buyer to ask for a holdback or an indemnity.

In British Columbia, section 97 of the Employment Standards Act says that if all or part of a business is disposed of, an employee's employment is deemed continuous for the purposes of the Act, so a buyer who keeps your drivers takes on their years of service. Plan when and how to tell the team; see what to tell employees.

Safety certificates do not move to a new owner

Every province requires a carrier to hold a safety certificate before it runs commercial trucks, and in each of the three provinces we cover, the certificate belongs to the legal owner, not to the trucks.

• British Columbia. A business that runs a commercial vehicle with BC plates, generally over 5,000 kg, needs a National Safety Code certificate, and the vehicle must be insured with that number. The Province says certificates, once issued, are not transferable between legal entities, and a new applicant must pass an online knowledge test.
• Alberta. The owner of trucks or trailers registered at 11,794 kg or more within Alberta, or over 4,500 kg crossing the border, needs a Safety Fitness Certificate, which is issued to the registered owner.
• Ontario. An operator of a commercial motor vehicle needs a CVOR certificate, and section 17 of the Highway Traffic Act says a CVOR certificate is not transferable.

In a share sale, the company stays the carrier, so its certificate carries on, though you should still update the province on new directors, addresses and contacts. In BC that is done with the Carrier Information Update Form. In an asset sale, the buyer must have its own certificate before it dispatches a single load, and that can take weeks. Make the buyer's certificate, insurance and plates conditions of closing. See transferring contracts, licences and permits.

The safety record is part of what you sell

Each province keeps a carrier profile with your rating, convictions, collisions, roadside inspections and audits. In a share sale the buyer inherits that record, good or bad, and insurers price the fleet on it. In an asset sale the buyer starts a new record, and some provinces can look at links between the buyer's people and other carriers. Get a current copy of your profile, explain any problems and show what you fixed.

Gather the paperwork a buyer or insurer will ask to see: driver files and abstracts, maintenance and inspection records for each unit, hours of service records and your written safety and maintenance programs. Since January 1, 2023, federally regulated carriers, which include trucks that cross a provincial border, must use electronic logging devices certified by Transport Canada. In BC, the Province says carriers must keep hours of service records for at least six months. Tidy records are a selling point.

Fuel tax, plates and accounts

Trucks that cross borders usually run under an International Fuel Tax Agreement licence and decals, and a plate account for the provinces and states they travel through. In BC, an IFTA licence is issued to the carrier with a pair of decals for each vehicle, and the Province says decals are not transferable between vehicles and must be removed when a vehicle is sold. In an asset sale, plan for the buyer to open its own fuel tax and plate accounts, and agree who files the last fuel tax return and who pays or keeps any balance. Insurance, permits and fuel cards are usually in the carrier's name too, so list every account and who will hold it after closing.

The fleet, loans and the yard

List every truck and trailer with its year, kilometres, condition, recent major repairs and what is owed on it. Most fleets carry loans or leases, and lenders usually need to be paid out or agree to the buyer taking over. See selling a business with debt. Get a recent appraisal or dealer values, because the buyer's lender will want one. Count parts and tires at closing; see selling a business with inventory.

If you rent a yard or shop, read the lease for assignment terms, how long is left and any limits on parking, fuelling or repairs. See your commercial lease when selling. If you own the yard, see selling a business and the building. A buyer may also ask about fuel tanks or spills on the property.

Customer and driver information

Customer rates, contracts and driver files are confidential and include personal information. In British Columbia, section 20 of the Personal Information Protection Act lets a business share personal information with a prospective buyer without consent, but only if it is needed to decide whether to go ahead and the buyer agrees to use it only for the deal. Share totals and summaries first, under a confidentiality agreement, and hand over full files at closing. See telling customers and suppliers.

Tax on the sale

How the sale is taxed depends on whether you sell assets or shares and how the price is split between goodwill, trucks, trailers and equipment. Trucks are often worth less on paper than on the market, so the split can change your tax a lot. See asset sale vs share sale, goodwill when selling and taxes when selling a business. If you run the business on your own without a company, see selling a sole proprietorship.

When a registered buyer acquires all or substantially all of what is needed to carry on the business, the section 167 election on Form GST44 can often remove GST/HST on the sale. In British Columbia, PST applies to taxable business assets sold with a business, such as vehicles, trailers and shop equipment, but not to goodwill. If the seller does not collect it, the Province says the buyer must self assess, and PST on vehicles follows its own rules in Bulletin PST 308. Alberta has no PST. See GST and PST when selling.

A simple worked example

These numbers are made up and rounded for illustration only. Your own deal, timing and tax will differ.

Questions to take to your lawyer and accountant

• Should this be an asset sale or a share sale, given my certificate, safety record and tax?
• Are my drivers and owner operators set up correctly, and is there any Driver Inc. risk?
• Which certificates, insurance, plates and fuel tax accounts does the buyer need, and should they be conditions of closing?
• How should we deal with the loans and leases on the fleet?
• How should we split the price between goodwill, trucks, trailers and equipment?
• Which customer contracts need consent to move to the buyer?
• Can we use the section 167 election, and how does PST apply to the trucks?

For more, read what your lawyer and accountant do. Running a repair shop instead? See selling an auto repair shop in Canada. Or a trades business? See selling a trades business in Canada. This guide is general information, not legal or tax advice for your situation. Questions about listing with us go to hello@sellmybusinessdirect.com.