What Is Included in a Business Asking Price?

A business asking price does not, on its own, tell you what you would receive. Ask for a written description of the proposed sale: the assets or shares involved, the items excluded, the treatment of working capital and liabilities, and any conditions affecting transfer. Two prices become more useful to compare once you understand those differences.

Your first conversation should produce a list of clear answers and unresolved questions. The transaction documents and professional due diligence will need to address the details.

Begin with what is being sold

Ask whether the proposal is an asset purchase or a purchase of shares in a corporation. In an asset purchase, identify the particular assets being acquired. In a share purchase, the shares change hands and the corporation remains a separate legal entity owning its assets. The CRA explains these different ways of acquiring an existing business. CRA: buying an existing business.

Ask who owns each important item. Equipment on the premises may be leased, and a building or brand used by the operation may belong to another entity. Record this as a verification question instead of assuming that everything associated with the business is part of the sale.

Inventory: included, extra, or subject to a count?

Ask whether the quoted price includes inventory and, if so, what amount or method is assumed. Distinguish inventory intended for resale from raw materials, work in progress and operating supplies where relevant.

Useful questions include:

• What date does the inventory information cover?
• How will the amount and condition be checked?
• How will damaged, expired, obsolete or slow-moving items be treated?
• Are any goods held on consignment or already committed to customer orders?

An answer such as “inventory included” should lead to more detail about the items and calculation, rather than end the discussion.

Equipment: which items, in what condition?

Request an equipment list showing ownership, age, condition and known maintenance needs. Ask which tools, fixtures, computers and vehicles are essential to daily operation, and which the seller intends to retain.

Separate three questions: Is the item included? Can the seller transfer it? What will it cost to keep it useful? BDC identifies financial records, legal status and assets—including inventory and equipment—as areas to assess before buying a business. BDC: due diligence and valuation.

Working capital: what supports the first months of operation?

In accounting terms, working capital is current assets minus current liabilities. It helps explain the resources available for short-term operating needs. A transaction's agreed calculation and included accounts still need to be specified. BDC: working capital.

Ask how the proposal treats cash, receivables, inventory, supplier payables, customer deposits and prepaid expenses. Does the price assume a particular working-capital amount? Who will calculate it, from which records and at what date? Could that calculation change the final amount payable?

Also prepare a separate estimate of the money you may need to operate after completion. The asking price alone is not a complete acquisition budget.

Premises: property ownership and lease rights

Determine whether real estate is included, offered separately or not for sale. If the premises are leased, request the lease and amendments for professional review. Ask about remaining term, renewal options, rent changes and any consent or other requirements associated with the proposed transaction.

Consider the practical fit too: would the location support your plans, and what would relocation involve if staying were not possible? Avoid treating an attractive location as secured until the relevant documents and conditions have been assessed.

Intellectual property and digital assets

Ask about the business name, trademarks, software, website, domain names, designs, operating materials and other intellectual property the business relies on. Identify what is owned and what is licensed.

The Canadian Intellectual Property Office recommends checking ownership, protection status and third-party obligations when assessing IP for a transfer. CIPO: buying or selling IP assets.

For digital assets, also ask who controls the accounts and whether the provider permits the proposed transfer. Possession of a password is not a substitute for confirming the relevant rights.

Debt, liabilities and tax questions

Ask for a clear explanation of debts and obligations, including what is expected to remain, be repaid or transfer under the proposed arrangement. Have your advisers examine that explanation alongside the sale structure and supporting documents. In a share purchase, the corporation's liabilities require particular attention; BDC notes that acquiring shares involves an interest in the business and its liabilities. BDC: due diligence and valuation.

The CRA also describes how purchase amounts may be allocated among assets, inventory and goodwill, and when GST/HST rules may apply. Ask your accountant to assess allocation and tax treatment for the actual proposal; this guide does not determine either. CRA: buying an existing business.

Build an inclusion checklist before an introduction

Use four columns for each material item: included, excluded, unresolved, and evidence needed. Cover inventory, equipment, working capital, premises, IP, debt and other obligations. Add any seller training or handover support as a separate question with proposed scope and duration.

Mark verbal explanations as provisional until they are supported by the relevant records and agreements. For a wider first-call checklist, read questions to ask before buying a business.