Asset sale vs share sale: what changes hands?
In a dental practice asset sale, the purchaser acquires specified business assets. In a share sale, the purchaser acquires shares in the corporation that owns the practice. The distinction changes what must be investigated, documented and financed. It does not tell you, by itself, which offer is better.
For an Ontario dentist comparing proposals, the useful question is: what will I own, owe and need to operate on the first day after closing? A lower share price can conceal unresolved corporate obligations. An attractive asset price can exclude items you assumed were included. Compare the complete transaction before negotiating the headline amount.
This guide compares seven commercial decisions for a purchase of an operating practice. It is educational information, not legal, tax or financial advice. Partial partnerships, related-party transfers and DSO arrangements require their own analysis. For seller-specific tax planning, use the separate Canadian dental practice sale tax guide.
The two structures at a glance
| Decision | Asset purchase | Share purchase |
|---|---|---|
| What is acquired? | Assets identified in the agreement | An ownership interest in the existing corporation |
| Historical exposure | Review assumed obligations and liabilities that law may impose | Investigate the corporation's history and continuing obligations |
| Tax values | Review reasonable allocation of the purchase price | A share transfer alone does not reset the corporation's asset tax values |
| Lease and contracts | Check assignment, replacement and consent requirements | Check change-of-control and other consent requirements |
| People and patients | Plan employment arrangements and records responsibilities | Review existing arrangements and ownership-change responsibilities |
| Financing | Confirm borrower, security and operating funds | Confirm acquisition funding and treatment of existing debt |
| Closing readiness | Verify the purchaser can operate the acquired business | Verify the corporation and changed ownership can operate compliantly |
The table is a discussion aid, not a recommendation to favour one column. Ask your advisors to identify the unresolved issue in each row, the document that answers it and whether it changes price, conditions or your willingness to proceed.
7 decisions to settle before signing
1. Define the package, including exclusions
For an asset offer, ask for a schedule covering equipment, inventory, leasehold improvements, goodwill and relevant business rights. Identify leased equipment separately from owned equipment. Discuss telephone numbers, the practice domain, software access and supplier accounts explicitly. A chair in the treatment room is not proof that the seller owns it free of financing.
For a share offer, ask which corporation and which shares are being purchased. Establish whether the proposed transaction covers all ownership or only an interest. Request a clear explanation of cash, receivables, debt and other assets that will remain at closing. An appraisal of operating value should not be mistaken for a final share-price calculation.
Have both sides describe the same package in plain language. The buyer's working assumption, the seller's marketing summary and the lawyer's draft should be reconcilable. Any disagreement belongs on the open-issues list before you spend time debating price.
2. Decide what historical risk you can accept
A share transaction leaves the corporation in existence. Its past therefore matters to the purchaser's investment. BDC's acquisition guidance warns that buying shares involves the business's liabilities, including those absent from its books. Review tax filings, financing, disputes and significant commitments with the appropriate advisors.
An asset structure may allow more selective acquisition, but do not translate that into “no liability.” Ask counsel which obligations are expressly assumed and whether employment, statutory or other exposure requires separate treatment. The agreement's label cannot replace that analysis.
For each material finding, request a proposed response: more evidence, a closing condition, a price adjustment, contractual protection or withdrawal. If an indemnity is proposed, ask how it would work in practice, who would pay and what limits apply. A promise to compensate later is different from resolving a problem before closing. Use the dental practice due diligence checklist to organise the wider investigation.
3. Compare total economics, not tax slogans
Ask the accountant to prepare two comparable cases using the same operating assumptions. Each should show the purchase amount, estimated transaction costs, required working capital, financing assumptions and relevant tax effects. The seller should separately review expected net proceeds. Do not assume one party's preferred structure produces a benefit of the same size for the other.
The CRA's guidance on buying an existing business explains reasonable allocation of an asset purchase price and confirms that a change in share ownership does not change the tax values of assets held by the corporation. Those differences deserve modelling; they do not establish a universal price discount.
Keep allocation discussions consistent with what is actually included in the deal. Ask the accountant to explain any assumptions about deductions, exemptions or indirect taxes rather than treating them as confirmed savings. If a proposed reorganisation is essential to the economics, obtain advice on feasibility before agreeing to a price that depends on it.
4. Check whether essential contracts survive the transaction
Prepare a short register of the arrangements the clinic needs to keep operating: premises, equipment leases, practice software, payment processing and important service contracts. For each, record the contracting party, term, renewal date and the transaction-related clause your lawyer needs to review.
In an asset purchase, ask which contracts can be assigned and which must be replaced. In a share purchase, ask whether a change in ownership triggers consent, notice or other requirements. Do not assume that keeping the same corporate name settles the question.
For a Burlington or other Ontario practice whose value depends on its location, put the premises review near the beginning. Ask who will contact the landlord, what information is required and when the answer is needed. A proposed closing date should account for unresolved consent requirements rather than assume they will disappear.
5. Give staff, associates and patients a workable handover
Ask employment counsel to compare the two structures against the actual staff and associate arrangements. Prepare accurate records of roles, compensation, accrued entitlements and written agreements. Identify who will communicate with the team and when. Neither a sale structure nor the seller's confidence guarantees that a particular person will remain.
Patient records require their own plan. RCDSO's ownership-change guidance addresses confidentiality before disclosure to prospective purchasers, the selling dentist's written notification to patients and record-transfer responsibilities. Commercial arrangements must respect patient choice and access to records.
As a practical planning exercise, identify who will answer record requests, handle ongoing treatment questions and explain the change to patients. Confirm appropriate software access and information controls. Buying goodwill should not be described as buying ownership of patients, and retaining the corporate entity should not be treated as permission to ignore the handover.
6. Match financing to the proposed ownership structure
Send the lender and legal team the same version of the proposed transaction. Ask who will borrow, what security is required, how existing financing will be discharged or addressed, and whether any guarantees are requested. A discussion about lending capacity is not the same as approval of the final structure.
Build a closing funds schedule that separates the amount paid to the seller from professional costs and the cash needed to operate. Identify how receipts and payments around closing will be handled. Avoid assuming that all cash visible in a corporate bank account will be available to the purchaser.
Then test the schedule against your operating plan. If you intend fewer clinical days, additional staff or an early equipment replacement, show those assumptions to the lender. The most useful comparison is the one you can fund and operate, not the structure with the most appealing name.
7. Confirm the entity can operate after closing
Ontario professional-corporation requirements need attention in either structure. RCDSO's health profession corporation guidance states that dental fees cannot run through the corporation before a certificate of authorization is issued. It also addresses annual renewal and notification of shareholder changes.
Ask counsel to identify the entity that will operate, verify its ownership and documentation, and map any application or notification steps. If a new corporation or amalgamation is proposed, establish the sequence with the advisors handling it. A lender's willingness to finance a purchase does not confirm regulatory compliance.
Keep a closing checklist with an owner for each outstanding requirement. Mark evidence received rather than relying on verbal assurances. The proposed structure is ready to progress when the advisors can explain how the business will move from signing to compliant operation without an unresolved dependency.
How to choose between two offers
Consider a hypothetical buyer comparing an asset offer that excludes receivables with a share offer that leaves receivables and specified liabilities in the corporation. Comparing only the two prices would miss part of the bargain. The buyer needs a reconciliation of what remains, what must be paid and what funds are required immediately after closing. This is an illustration, not a market-price benchmark.
Request a one-page comparison with three outcomes for each issue: resolved, reflected in the proposed terms, or still open. Avoid turning an unknown into a convenient estimate merely to complete the table. Where the parties disagree, ask whether better documentation would resolve the issue or whether their preferences are commercially incompatible.
There is no universal winner. An asset proposal may suit a buyer seeking a clearly defined operating package. A share proposal may be workable where the corporate history, terms and economics are acceptable. The decision should follow the evidence and professional advice for that practice.
The Dental Broker Team provides practice appraisal services. When requesting an appraisal for a transaction, explain the proposed structure so the valuation scope and the offer can be compared meaningfully. Bring the resulting questions to your lawyer and accountant before committing.
Frequently asked questions
What is the main difference between an asset sale and a share sale?
An asset sale transfers specified business assets. A share sale transfers an ownership interest in the corporation that holds the practice. The difference affects the documents, risks and financial assumptions that need review.
Does an asset purchase eliminate every historical liability?
No. Ask your lawyer to distinguish obligations you agree to assume from exposure that may arise under applicable law. A selective asset purchase still requires due diligence and carefully documented terms.
Is a share purchase automatically cheaper?
No. Compare the included assets, remaining obligations, financing, transaction costs and tax assumptions. Two prices are not comparable until you know what each proposal includes and excludes.
Can a share sale avoid landlord consent?
Do not assume it can. Have the lease reviewed for change-of-control, notice and consent provisions. The answer depends on the actual agreement and the proposed transaction.
When should the structure be discussed?
Discuss it before committing to a letter of intent or purchase terms. Give the lawyer, accountant, lender and valuator a consistent description of the deal so they can identify incompatible assumptions early.