Tips for Buying a Business for Immigration Purposes in Canada
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.
1. 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.
2. 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.
3. 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.
4. 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.