1. I have come to Canada from Dubai and am starting a small business. The agent prepared an offer to purchase a laundry for me under the Bulk Sales Act. What is Bulk Sales Act and do I need to have a lawyer when I am buying a small business?

The Ontario Bulk Sales Act requires a buyer of the business to obtain an affidavit from the seller that all the liabilities of the business are paid off and if they are not, arrangement is required to be made to have them paid off on closing. If you do not have this affidavit, the purchaser can be liable to the creditors of the seller to the extent of the purchase price.

This law was designed to ensure that the vendor does not collect the money and walk away with the "booty" received, ignoring the creditors of the business. As the vendor can leave "town," the purchaser is saddled with the responsibility under the act of ensuring that the creditors are paid off on closing.

If you purchase through the shares, the liabilities continue with the business and you, as the new owner, will assume the obligations of the business and you do not need to comply with this Act. In a Bulk Sales purchase, you are only buying the assets and not the liability and therefore the procedure for obtaining the affidavit from the vendor is set up to ensure the fairness to the people who have claims against the business.

The Bulk Sales affidavit is registered in the local court office where you make the purchase and there is a 6-month period in which the creditor can ask for a review of the transaction. The time runs from the date of registration.

When purchasing a business, it is very helpful to have a lawyer assist you in the purchase transaction. Compliance with the Bulk Sales Act is only one of the many reasons you need a lawyer. The lawyer will assist you to check the liens on the assets you are buying. Under the Personal Property Security Act a computer register is kept, which lists the liens on the assets by name of the lien holder and the debtor and the assets covered by the lien. If you buy a business and ignore the liens, the lien claimant, usually a finance company or a bank, will have a right over the assets and can take the assets. For motor vehicles, a special register is kept which lists the engine number of the vehicle.

When you take over a business, there is usually a lease of the property which you need to review. The language of the leases is arcane and usually needs a lawyer to decipher the language. You can have a good business, but the problems of the lease can come back haunting after closing if you have not looked at the lease properly.

When buying a business, you also need to look at the tax aspects of the purchase transaction. You have to pay 7% of the purchase price of the "chattels," which are the tangible equipment and other items of the business. An accountant or the lawyer can help you allocate the purchase price between the goodwill and chattels, and minimize the tax burden on the purchase.

Goods and Services Tax is also payable on closing for the purchase unless you have registered your business under the GST and claim exemption on closing.

An experienced lawyer can also guide you through other related items of purchase, such as whether you should incorporate the business or not at the time of purchase.