Do you want to buy a business in Canada for migration or citizenship? If YES, here is a detailed guide to buying a business in Canada as a foreigner. Canada is one country that has the friendliest migration policies and there are loads of opportunities waiting for entrepreneurs who wish to immigrate to Canada and establish their business there.
However, getting eligible for permanent residency may not be easy for everyone under the present rules; hence buying a business in order to get Permanent Residency in Canada is one of the easy options for those failing to get sufficient score for express entry immigration to Canada.
A foreign investor entrepreneur, motivated to live in a particular area of Canada, can purchase a suitable business and relocate to that area of choice. This is far more advantageous than trying to meet provincial immigration programs. Thus, if you want to buy a business as a way to immigrate into Canada, here are things you need to know and the steps you can follow.
7 Steps to Buying a Business in Canada as a Foreigner
Identify a business to purchase
The very first step a foreign investor who wants to start a business in Canada in a bid to immigrate into the country can take is to look out for a suitable business to purchase. In a bid to do this, you have check where your skills and experiences lie most so you can set your sights in those areas. Thereafter, you have to look out for a Canadian business that meets your skills and that is up for sale.
To do this effectively, you may have to contact a business broker who would help you look out for an available business that meets your taste and budget. Of course, there is no rule that says you cannot find this business on your own, but since you are still a foreigner, it is more advisable to have someone who is a local to help you in the search.
Hire a business broker
When purchasing a business in a foreign country, your best bet would be to hire someone who is familiar with the business terrain in the country to help you out. For this reason, you need to hire a business broker. This person must be a local who is able to speak your language, so he or she would know the laws on ground, and would be able to guide you through the legal minefield to avoid making mistakes.
The reason you would need him or her to speak your language is so that you can understand yourselves better, but you have to bear in mind that the official languages in Canada are English and French, so you need to learn either of the two languages.
You should also do some research to understand and select advisors, trade partners, contacts in the industry, banking circles, etc. as these people would always come in handy at one point or the other when buying a business in Canada.
If you have identified the business you would like to purchase, the next step to follow is to write a suitable business plan for your intending business. It is noted by law that the purchase of a business by a foreign national must be supported by a suitable business plan that will, along with other conditions, result in the creation or retention of Canadian jobs.
Your business plan must reflect what you tend to do differently to turn the business around. It must reflect your plans and financial projects, and most importantly, it must reflect how the business would impact the country and its citizens positively.
Negotiate a sale
With a suitable business plan at hand you are ready to start negotiating the sale of the business. It is not likely that you would do this on your own, so this is where the services of your business broker comes in. He or she would deal with the intricacies of negotiating the sale and ensure that all the necessary inspections have been made and the papers signed. Note that you may not be in the country when all these are going on, so that is why you need to get yourself a trusted broker.
Apply for Labour Market Impact Assessment Document
The next step in buying a business as a foreigner in Canada is to get your Labour Market Impact Assessment document. A Labour Market Impact Assessment (LMIA) is a document that an employer in Canada may need to get before hiring a foreign worker.
Positive LMIA will show that there is a need for a foreign worker to fill the job. It will also show that no Canadian worker is available to do the job. A positive LMIA is sometimes called a confirmation letter. For a foreigner to buy a business in Canada, he or she must present this document.
What is a LMIA (Labour Market Impact Assessment)?
An LMIA is a document from Employment and Social Development Canada that also gives the employer permission to hire a temporary worker. In order to complete the business buying process, the Labour Market Impact Assessment (LMIA) is submitted along with a suitable business plan, so you can work there and also hire workers.
Apply for temporary work permit
Once a positive LMIA document is issued, the foreign investor is now allowed to apply for a 12-24 months, renewable temporary work permit. You should note that once a suitable business is found, it will take 2-3 months to complete the LMIA application process. It will take less than 3-months in most jurisdictions, to receive a work permit.
Apply for permanent residency
Once all these processes have been completed and the entrepreneur legally owns the business, he or she can start the process of applying for permanent residency. There is no minimum wait time. Qualified candidates may apply for permanent residency with their families, soon after they arrive in Canada.
Who Qualifies to Buy a Business in Canada?
It should be noted that not everyone qualifies to buy a business in Canada. That fact that you own a successful mom and pop shop in the united states, does not mean that you can sell your business and buy anther in Canada so you can get residency status.
There are certain qualities the Canadian government is looking for before they can allow foreigners to purchase a business in the country. The criterion includes that;
- The foreign investor must have verifiable and transferable management experience.
- He or she must have sufficient assets to purchase the targeted business in Canada.
- He or she must have sufficient language abilities in either English or French to actively work as a manager in the business.
4 Different Ways to Acquire a Business in Canada
Buying a Business
One of the ways you can acquire a business in Canada is to buy it. When you think of buying a business fully, then there is of course moderate risk associated with it. The investment that you have to make is also pretty high and the start-up time is fast. You may also face some challenges to start the business and the returns that you get are also relative to how much progressive the business has made.
- Purchasing a Franchise
Another way a foreigner can acquire a business in Canada is to purchase a franchise. There is least risk for you if you happen to take on the franchise of an already existing chain of business. The cost associated with it is also not very much so as to burn a hole in your pocket. So, for must entrepreneurs intending to buy a business in Canada, buying a franchise would be most logical thing to do.
- Starting a business from scratch
Another way you can get a business in Canada is to start one yourself. In this kind of venture, the risk associated is very high and it is also difficult to start. You will need a lot of ground work to establish yourself, be known to people, make contacts etc. Basically, it will take a lot of time to set up, but once the initial work is done and the business picks up, then it will be an easy ride ahead!
- Buying some shares in a business
Another successful and less risky way to own a business in Canada is to buy the shares of an already existing business. When buying some part of the shares in a business, know that the cost associated with it can be on the high side, but the risk you would accrue would be quite low or moderate.
What to Examine When a Buying a Business in Canada
When shopping for a business, it is easy to fall totally in love with a business that was presented to you so beautifully. But you should know that if you are buying a business, you must not only rely on things the sales presentation say, you must make double effort to make your findings yourself.
There are subtle things you need to look out for so you do not buy a defective business. Here are some important things to consider:
- The Lease
This is one the most important factors to consider when buying a business. In many cases, the business itself depends on the location; if the lease has only 3 more years to go, and no guaranteed right to renew it, then you are purchasing a 3 year business! Look at the lease term, renewal options, and whether the landlord requires personal guarantees.
2. The Assets
Don’t assume that all of the assets that you see at the business are included in the sale; get the asset list in writing. Ensure that the equipment that you need is owned by the business, or if not, that there are lease agreements in good standing.
3. Financial Statements
Have a good accountant or lawyer review the financial statements and income tax returns for the past 3 years. Your trusted advisor can raise questions for you to ask the Seller.
4. Look for the trends
You must look out for the trends the business is exhibiting. You must find out if the business growing or declining, and then ask why.
5. Business contacts
When doing business in a new country, it is important to be able to make the right contacts, including professional advisors, bankers, industry contacts, trade associations, and others. Having the right contacts would make sure that the business buying process goes smoothly, and you have nothing to regret in the end.
Tips for Buying a Business for Immigration Purposes in Canada
Opportunities under formal investment-based immigration programs are very limited in Canada. However, there are many business opportunities you can leverage in Canada to achieve your immigration purposes. If it sounds too good to be true, and then proceed with extreme caution. Nonetheless, here are few tips to consider;
Buy a business that is relevant to your background
Note that one of the factors Canadian immigration authorities will check when assessing your immigration application is whether or not you can manage your newly acquired Canadian business. These officers will also analyze if your business purchase in Canada makes sense given your background and previous business experience. More reason it is imperative to avoid businesses that are completely new to you as this might raise questions about your fitness to operate that business.
Franchising vs. the Independent Business
As a buyer, you have the option of purchasing an existing independent business or a franchise. Each has its strengths and weaknesses. Franchises come with a set of rules that you are expected to follow. The franchisor has taken the time to develop a business template, which is then rolled out from location to location. If you are looking to use your managerial skills, and won’t feel cramped if you can’t put your own ideas into play, this may be the ideal form of business for you.
Buying an independent business gives you the freedom of setting your own rules. You set the vision of the company, control human resources, and get to choose which supplier you’re going to buy from. In an independent business, the decisions and the success of the business rests on your shoulders.
Note that there is room for creativity and innovation, but at the same time, your choices may destabilize the business. Unless you are buying a business with a strong, existing brand, you may not have the same recognition that you would get with a franchise. On the flip side, you won’t have to pay franchise fees and royalties.
Buy an active business that has been operational for at least 12 months
If you intend to buy a business in Canada for immigration purposes, the rule of thumb is to buy an established company with several years of operational history behind it and loyal employees. Canadian immigration authorities, in general, do not like ‘job offers’ made by start-up companies under the Express Entry program.
If the company you intend to acquire has been in business for less than 12 months, be prepared to provide sufficient documents to show that your newly acquired business is actively engaged in business and has adequate revenue to support your permanent residence application. Alternatively, operate your business for 12 months before applying for permanent residence status in Canada.
Buy a business with good gross sales for the past 2-3 years
When acquiring a business in Canada, always request that the seller of the business provides you with some fundamental documents related to the company, including the following:
- Articles of incorporation & shareholders agreements;
- Official corporate tax filings for the past 3 years (T2), including Schedule 100 – Balance Sheet Information and Schedule 125 – Income Statement Information;
- T4 Summary of Remuneration paid for the most recent year;
- GST/HST filings for the current year;
- Lease agreement for the premises, and
- All other documents & agreements related to the operation of the business.
When reviewing the corporate tax filings, try to pay adequate attention to Schedule 100 and Schedule 125 and check the reported gross sales numbers for the company in the past year. In addition, review the most recent GST/HST filings to have an idea about the current sales volumes. Since your business in Canada is expected to have sufficient revenue streams to support your permanent residence application, always strive to buy a company that has $250,000+ of gross sales per year.
Also, ensure to check the net profit number to ensure whether the company you are buying is profitable. However, Canadian immigration authorities are not strictly concerned with the company’s profitability, but rather review if the gross sales are substantial enough to support your wages and operational costs.
Where to Find Businesses for Sale in Canada
While you can find listings in the classifieds of your local newspapers, you probably won’t find what you’re looking for there. Finding the right business will take time, effort, and more than a little detective work; here are a few of the resources you can use to find businesses for sale.
Note that trade publications specific to the industry you want to be in is a sure and useful resource as they often have businesses for sale listed in the classified section. You can find listings for many Canadian trade magazines online at the Canadian Business Press site.
In Canada, newspapers also have classified sections where you can find listings for local businesses. Look for real, local businesses, but be wary of vague “business opportunities.”
Commercial Investment Magazines/Newsletters
Note that this can often be found in more populated areas. For instance, in southern Ontario, there are a whole lot of free publications, such as the Business Exchange, which can be picked up at magazine racks throughout the Greater Toronto Area (GTA). In these publications, you will typically find retail businesses, such as restaurants, apartments, and convenience stores, where a property is often linked to the sale of the business.
The Internet is speeding up the pace of business, making it easier for businesses to close transactions around the world. There is still room for further development in this aspect of the Internet, but you can currently find businesses listed for sale on http://www.buysell.com/.
Word of Mouth
For centuries, this has been an excellent way to learn about a business that has just come up for sale or one that may not be listed but the business owner would consider selling. Networking and business events can help you leverage this channel of information, as can communication with your banker, lawyer, and accountant.
In addition, when you are looking for a specific type of business, you can put the word out in the industry that you are looking to buy and ask contacts in the industry about businesses that might be for sale.
Have it in mind that brokers earn commissions when they help a seller close a deal. A good broker is an excellent resource; a part-time broker or half-serious broker will not likely add value to your search. Note that the best way to find a broker is to tap into your network and ask people you trust for referrals. If you are looking to buy a business in a specific industry, ask people within the industry if there are any brokers they would recommend.
A foreign investor, eager to live in a particular area of Canada, can acquire a suitable business and relocate to that area of choice. This is far more advantageous than trying to meet provincial immigration programs. With the exception of the Quebec Immigrant Investor program, provincial investment-based immigration programs are becoming less attractive to foreign investor entrepreneurs.
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