Transferring Contracts, Licences and Permits When Selling a Small Business

When you sell, a buyer is paying for a business that keeps running: the same suppliers, the same customers, the same phone number and the right to open the doors on day one. Much of that sits in contracts, licences and accounts that don't always move on their own. A simple list, started early, keeps closing day calm.

Asset sale or share sale changes everything here

How you sell decides how much needs to be transferred. Our guide to asset sale vs. share sale explains the two in full.

• Asset sale. The buyer buys the things the business uses, not your company. Each contract, lease and account has to be moved to the buyer, usually by an assignment. Many contracts say you need the other side's written consent to assign them.
• Share sale. The buyer buys the shares of your company, so the company itself keeps its contracts, accounts and many registrations. The thing to watch is a change-of-control clause: some contracts need consent, or can be ended, when the owners of the company change.

Either way, the work is the same in spirit: find every agreement the business relies on, read what it says about transfer or change of control, and line up any consents before closing.

Supplier and customer contracts

List the agreements that matter most: main suppliers, distribution or franchise agreements, service contracts, and any customer contracts with a fixed term or regular orders. For each one, note:

• whether it can be assigned, and if consent is needed;
• any change-of-control clause;
• when it ends and how it renews;
• any deposits, credits or special pricing that may not carry over.

Buyers will ask for this list during due diligence, and the purchase agreement will usually list which contracts move. Our guide to the purchase agreement explains how consents and conditions fit in.

Equipment leases and financing

Leased vehicles, kitchen equipment, point-of-sale terminals and copiers usually belong to the leasing company, not you. The lender will normally want to approve the buyer before the lease moves, much like a credit check. Sometimes it's simpler to pay out the lease at closing and adjust the price. Ask each lender for a payout figure and their transfer process early.

Your commercial lease

For many small businesses the lease is the most important contract of all. Most leases need the landlord's consent to assign, and many treat a share sale as a change that needs consent too. Landlords often ask for the buyer's financial information and may ask you to stay on as a guarantor. Our guide to your commercial lease when selling covers what to check and when to approach the landlord.

Business licences

Municipal business licences are usually issued to a named owner at a set address, and in most places they can't simply be handed over. In an asset sale the buyer typically applies for a new licence in their own name. In a share sale, the city may still want to be told about new owners or directors. Check with your city or town: how long approval takes, whether an inspection is needed, and whether the buyer can apply before closing.

Liquor, food and health permits

Businesses that serve alcohol or food, or that offer personal services, often need provincial or local permits on top of a business licence. These usually have their own transfer rules and can take longer than anything else on the list:

• Liquor licences. Provincial regulators generally require an application to transfer a licence or approve new owners, often with background checks. Start early, as this can take weeks or months.
• Food premises and health permits. Local health authorities usually need to be told about a new operator and may inspect before the buyer opens.
• Other permits. Signs, patios, fire inspections, waste or trade-specific licences may each need a new application or notice.

Make the buyer's permits a condition of closing, or agree what happens if one is delayed, so neither of you is left waiting with the doors closed.

GST/PST and payroll accounts

Tax accounts generally don't transfer in an asset sale. The buyer registers their own GST/HST, PST and payroll accounts, and you file final returns and close yours, or keep them open if your company carries on. In a share sale the company keeps its accounts, but you should update the owners and directors on file with the Canada Revenue Agency. Our guide to GST and PST when selling a business explains how sales tax applies to the sale itself. WorkSafe or WCB accounts often follow similar rules, so ask your provincial board too.

Domain, phone numbers, website and social accounts

These are easy to forget and matter a great deal to customers. Make a list with the account name, who controls it, and how to transfer it:

• Domain name. Move it to the buyer's registrar account, or change the owner details. Check the renewal date so it doesn't lapse during the handover.
• Phone numbers. Ask your phone provider about transferring the account or porting the number to the buyer's provider. Plan the date so calls never go unanswered.
• Website and email. Hand over hosting logins, and agree how long you'll keep access to your old email to forward messages.
• Social media and listings. Add the buyer as an admin, then remove yourself once they're settled. Update your business profile on maps and review sites.

Change passwords at handover and avoid sharing personal logins. Where an account is tied to your own name, set up a business login for the buyer instead.

Software subscriptions

Accounting, booking, point-of-sale and scheduling software often holds years of records. Some services let you transfer the account; others need the buyer to open a new one and import data. Export what you need to keep for your own records first, and agree who pays for subscriptions that renew around closing.

Warranties and service plans

Manufacturer warranties on equipment and vehicles, and service plans for things like HVAC or kitchen hoods, may or may not transfer to a new owner. Gather the paperwork and ask each provider. A transferable warranty can be a small but real selling point.

A practical checklist

1. List every contract, lease, licence, permit, account and subscription the business uses.
2. Note for each: who it's with, when it ends, and what it says about assignment or change of control.
3. Mark the ones that need consent, a new application or a payout.
4. Agree in the letter of intent and purchase agreement which items move, who applies for what, and which consents are conditions of closing.
5. Contact landlords, lenders and key suppliers once you have a signed letter of intent, not before.
6. Have the buyer apply for licences and permits early.
7. Prepare a handover sheet with account names and steps for the domain, phone, website and software.
8. After closing, confirm each transfer is complete and close or update your own accounts.

A simple timeline

A note on advice

This guide is general information, not legal, tax or financial advice. Rules for licences, permits and tax accounts differ by province and city, and contracts vary a great deal. Please have your own lawyer review assignments and consents, and your accountant confirm what happens to your tax accounts, before you sign.