Buying a Business in Canada: A Guide for Foreign Entrepreneurs.

Understanding the Canadian Business Market

The Canadian business market is a thriving and diverse economy, with various industries contributing to its growth. As a foreign investor, it’s essential to understand the market trends, key sectors, and the types of businesses that are in demand. Canada’s business market is driven by innovation, technology, and entrepreneurship, making it an attractive destination for foreign investors.

Some of the key economic industries in Canada include:

• Technology: Canada is home to a thriving tech industry, with major hubs in cities like Toronto, Vancouver, and Montreal.

• Healthcare: Canada’s healthcare sector is a significant contributor to the country’s economy, with a growing demand for innovative healthcare solutions.

• Renewable energy: Canada is committed to reducing its carbon footprint, making renewable energy a promising sector for investment.

• Advanced manufacturing: Canada’s manufacturing sector is driven by innovation and technology, with a focus on producing high-quality products.

Understanding the Canadian business market is crucial for foreign investors looking to purchase an existing business or start a whole new business venture. It’s essential to research the market, identify trends, and understand the competition to make informed investment decisions.

Business Immigration To Canada Through Business Ownership

A Guide For Foreign Investors Buying a Business in Canada

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

Finding a solid business with sufficient assets and excellent growth potential for your immigration journey is complicated. 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.

Qualifying as a Foreign Investor

To qualify as a foreign investor in Canada, you must meet specific requirements. The Canadian government has established guidelines for foreign investors, including:

• Having a minimum net worth of $250,000 to $500,000, depending on the province or territory.

• Having a minimum of two years of business experience, either as an entrepreneur or as a senior manager.

• Having a good credit score and a clean financial history.

• Being able to demonstrate your ability to manage and operate a business in Canada.

Additionally, foreign investors must also meet the requirements of the Labour Market Impact Assessment (LMIA) and obtain a work permit. The LMIA is a document that assesses the impact of hiring a foreign worker on the Canadian labour market. To obtain a work permit, foreign investors must demonstrate that they have a genuine intention to operate a business in Canada and that they have the necessary skills and experience to do so.

It’s essential to note that the requirements for foreign investors may vary depending on the province or territory in which they wish to invest. It’s recommended that foreign investors consult with a business immigration lawyer to ensure they meet all the necessary requirements.

Step 1: Focus on Businesses that the IRCC Likes

Suppose you plan to move to Canada as a business owner or an owner-operator. In that case, you must demonstrate to Canadian immigration authorities that your business activities in Canada will bring “significant economic benefit” to Canada. While some programs, like the Owner-Operator Program, are not categorized as a formal immigration program, they still offer valuable opportunities for foreign entrepreneurs and investors seeking to establish business operations in 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

Option 2: Significant Benefit Activities

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 wages to all its employees.

ProTip: Avoid Businesses that the IRCC generally dislikes

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. You can narrow your search by province or even the city of your choice on these sites.

While those sites are reliable, you can’t trust every website that claims to have business listings. Scammers tend to frequent places 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 genuine 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 of finding great businesses in Canada. Once the Labour Market Impact Assessment (LMIA) is complete and approved, you can apply for a renewable temporary work permit valid for 12-24 months.

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 they will save you countless hours of searching, but you’ll also benefit from their expertise. Check out brokers like Sunbelt, or Aldrin Raphael Business Brokers.

Narrow the Selection

After finding a few businesses for sale in Canada 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 three 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 existing 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 a practical starting point.

If possible, meet with the owners of your top options and ask them why they’re selling their businesses. Spend a few days in and around each targeted business to learn more about the customers, the typical sales volumes, and how 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 two 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? Please read our article about the top 3 tips for buying a business in Canada.

Step 3. Do Your Due Diligence

You’ve researched your options and 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 buying a business in a foreign country. You would 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 the immigration program 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 suitable business’s paperwork and make sure it is legitimate and profitable, 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 for permanent residence. 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 company, foreign entrepreneur or foreign investor buying a business in Canada.

Read our detailed Guide for Foreign Investors wishing to obtain Canadian permanent residence and Canadian citizenship.