Understanding Transaction Structure in BC Hospitality Real Estate

When buying or selling a hospitality property in British Columbia, one of the first questions that comes up is how the transaction will be structured. The two most common structures are a share sale and an asset sale. Understanding the difference is critical — it affects taxes, licences, liabilities, and the overall cost of the deal for both parties.

What is a Share Sale?

In a share sale, the buyer purchases the shares of the corporation that owns and operates the business. Rather than buying the physical assets individually, the buyer steps into the shoes of the existing company — acquiring everything the company owns, including its assets, contracts, licences, and liabilities.

Most hospitality transactions in BC are structured as share sales. The primary reason is the liquor licence. In BC, a liquor licence is held by the corporation, not the individual. A share sale allows the licence to transfer with the company, avoiding the lengthy and uncertain process of applying for a new licence. For hotels, motels, pubs, and restaurants, this is often the deciding factor.

What is an Asset Sale?

In an asset sale, the buyer purchases specific assets of the business — the real estate, equipment, furniture, and fixtures — rather than the shares of the company. The existing corporate entity stays with the seller, and the buyer typically sets up a new company to hold the acquired assets.

Asset sales give buyers a clean start. There is no inherited corporate history, no unknown liabilities, and the buyer can negotiate exactly which assets are included in the transaction. However, asset sales are more complex when a liquor licence is involved, as the licence does not transfer automatically and must be reapplied for — a process that can take months and carries no guarantee of approval.

Key Differences at a Glance

• Liquor licence transfer — Share sales allow the licence to transfer with the company. Asset sales require a new application.
• Liabilities — Share sales include all existing corporate liabilities. Asset sales allow buyers to leave liabilities behind.
• Tax treatment — Share sales and asset sales are taxed differently for both buyers and sellers. The optimal structure depends on each party’s situation.
• Due diligence — Share sales require a thorough review of the corporate history, including past tax filings, outstanding obligations, and any legal matters.
• Simplicity — Asset sales can be simpler to negotiate in terms of what is included, but more complex when licences and permits are involved.

Which Structure is Better?

There is no universal answer — it depends on the property, the licences involved, and the financial and tax positions of both the buyer and seller. In BC hospitality real estate, share sales are the most common structure precisely because of how liquor licences work in this province. However, every transaction is different and should be evaluated on its own merits with qualified legal and accounting advice.

What This Means for Buyers

If you are acquiring a licensed hospitality property in BC, expect the transaction to be structured as a share sale. This means your due diligence needs to go deeper than a standard real estate purchase — you are buying a company, not just a building. Review financials, tax history, employee agreements, supplier contracts, and any outstanding liabilities before committing.

What This Means for Sellers

If you are selling a licensed hospitality property, a share sale typically provides the smoothest path to closing. Buyers are more willing to proceed when the liquor licence transfers cleanly, and a well-documented corporate history reduces friction in due diligence. Working with advisors who understand hospitality transactions in BC will help you structure the deal to maximize your outcome.

Working With BC Commercial Group

BC Commercial Group has structured and closed hospitality transactions across British Columbia for over 34 years. We understand the nuances of share sales, asset sales, and liquor licence transfers in this market. If you are considering buying or selling a hospitality property in BC, contact Larry or Brady Berisoff to discuss how to structure your transaction properly from the start.