Buying a Business in Canada: Guide for Foreign Investors

Buying a Business in Canada: Guide for Foreign Investors

Immigration Through Business Ownership

A Guide For Foreign Investors Buying a Business in Canada

If you want to relocate to Canada as a foreign investor or entrepreneur, buying an established business in Canada can be a good option for you to become eligible under the Entrepreneur Work Permit Program.

Finding a solid business with great growth potential for your immigration journey is a complicated process. You need to select a business that fits your skills, previous experience, and financial goals. In addition, the business you plan to buy must meet the requirements set by the Canadian immigration authorities.

In this article, we explore how foreign entrepreneurs should go about finding the right business to buy in Canada.

 Step 1: Focus on Businesses that the IRCC Likes

If you plan to move to Canada as a business owner or as an owner-operator, you must demonstrate to Canadian immigration authorities that your business activities in Canada will bring “significant economic benefit” to Canada. You can demonstrate “significant economic benefit” in several ways, including:

  • Option 1: buying a business in key economic industries or sectors;
  • Option 2: buying a business that is engaged in “significant benefit” activities; or
  • Option 3: investing a substantial amount of money into a business that will create employment opportunities for Canadians.

Option 1: Preferred Industries & Sectors

Agriculture, including food/beverage production and food processingInformation and communication technology
AquacultureInternational Education
Aviation/aerospace

Mining/Mineral Development
Biomedical (includes research and development, manufacturing, etc.)Mining & Natural Resources, Forestry
CybersecurityRegistered Patents
Cultural IndustriesTransportation
Energy or Natural Gas SectorTourism, tourism products, attractions, services, and facilities
ExportsFintech
FarmingFilm and Video Production
Financial ServicesGreen Economy

Option 2: Significant Benefit Activities

Developing new products & servicesAdopting new technology
Developing innovative approaches to traditional businessesIncreasing exports from Canada
Value-added businesses
Increasing research and development, and technology commercialization
Transferring technology and specialized knowledgeProviding products or services to an under-served local or regional market

Option 3: Significant Economic Impact

  • Investment of at least $250,000 into a business in Canada;
  • Job creation/retention for at least 2 Canadians; and
  • A viable business that can generate sufficient revenue to pay the wages to all its employees.

Businesses that the IRCC generally dislikes

bed and breakfastsautomated car wash operations
hobby farms and home-based businessesscrap metal recycling
payday loan, cheque cashing, money changing and cash machine businessesbusinesses selling used goods (excluding businesses that provide value-added services such as repairs, refurbishing, or recycling)
pawnbrokersreal estate brokerage, insurance brokerage, or business brokerage
tanning salonsreal estate development activities
DVD rental storesgoods trading businesses (e.g. import/export), unless value add is demonstrated
coin-operated laundriesbusinesses involved in producing, distributing, or selling pornography or sexually explicit products or services, or providing sexually oriented services

Step 2: Research & Select the Right Business

In your business search, start by searching the all-powerful Internet. There are several sites where owners list their businesses, such as Business for Sale, Business Sell Canada, BuyAndSellBusiness.com, and even the Canadian Realtor site. On these sites, you can narrow your search by province or even the city of your choice.

While those sites are reliable, you can’t trust every website that claims to have business listings. Scammers tend to frequent sites like Kijiji and Craigslist because they’re unregulated and it’s easy for the scammer to appear legitimate.

A helpful hint: you’re unlikely to find a profitable business with true potential for anything less than around $250,000. If a business is for sale for less than that, it is probably not a very profitable business. However,  it is also true that due to the COVID pandemic, you may be able to buy great businesses for a very reasonable price. You can read our article on how the COVID pandemic improved foreign investors’ chances to find great businesses in Canada.

Call a Broker

Another route is to work with a business broker. These professionals specialize in finding businesses for sale and helping you through the buying process.

A business broker can be a sound investment because not only will they save you countless hours of searching, but you’ll have the benefit of their expertise as well. Check out brokers like Western Canada Business Brokers, Sunbelt, or Aldrin Raphael Business Brokers.

Narrow the Selection

After you’ve found a few businesses for sale that interest you, start with some basic fact-finding.

Either contact the businesses themselves or have your broker reach out to them for the company’s corporate tax returns for the past 3 years. In Canada, they will be called T2 Corporate Income Tax Returns, Schedule 100, and Schedule 125. You should also request their filings for the current year for the Goods and Services Tax/Harmonized Sales Tax (GST/HST).

These documents give you an initial look into the business’s gross sales so you can compare your options. While it’s only the start of your research into the financial aspect, it provides an effective starting point.

If possible, it’s a good idea to meet with the owners of your top options. Ask the owners why they’re selling their businesses. Spend a few days in and around each business to learn more about the customers, the typical sales volumes, and the way the operation runs.

Our Tips:

 No matter which strategy you choose, make sure that the business you select meets the following criteria:

  • Active and operational business (preferably with 3+ years of history)
  • It has at least 2 employees (the more employees it has the better)
  • It is generating sufficient revenue to cover most of the expenses (at least $300,000+)
  • Your background or skillset is relevant to the business you plan to operate in Canada
  • There is a strong potential for sustained commercial success

Want more tips? Read our article about the top 3 tips for buying a business in Canada.

Step 3. Do Your Due Diligence

Let’s say you’ve researched your options and you’ve zeroed in on one particular business you want to buy. Now it’s time to bring in the cavalry.

Hire a team of experienced professionals to take you through the due diligence process. This extensive research mission should uncover any issues the company may have, like bankruptcy filings, lawsuits, debt, zoning problems, or other disputes that would land in your lap. Your team will be able to assess the risks and determine how this should affect your purchase.

While due diligence is critical in any business purchase, it’s especially vital when you’re buying a business in a foreign country. You need professionals who have expertise in that country’s laws, liabilities, and regulations.

In addition to the due diligence specialists, you’ll need professionals who can help you through the purchase transaction. A business attorney and an accountant are must-haves.

If you’re planning to apply for immigration into Canada using your business, you’ll also need an immigration lawyer before you make your purchase. Your immigration lawyer will be able to investigate and determine if the business can suit your immigration needs.

How We Can Help with Buying a Business in Canada

Sadly, many immigrants end up buying businesses for immigration, that they aren’t interested in, aren’t good at, and won’t make any money from or with! Using our network of local contacts and our understanding of the business culture in Canada, we can help you find opportunities that fit you and your immigration goals.

Our team will research and identify the best business to suit your business and immigration needs. We’ll review the business’s paperwork and make sure the business is legitimate and profitable, all while ensuring that it will support your immigration needs. Finally, we’ll follow through with the purchase transaction for you.

Sobirovs Law Firm specializes in assisting foreign investors buying a business in Canada who plan to relocate to Canada. You can focus on your business while we focus on your permanent residence and ultimately your citizenship in Canada.

To start the process today, reach out to our team if you are a foreign entrepreneur or foreign investor buying a business in Canada.

Complete the Business Immigration Assessment Form