Ontario’s business brokers answer to the real estate regulator
Ontario law counts a business as real estate, so whoever markets or negotiates your sale registers with RECO. Here is how to check that registration and each professional who works beside it.
Ontario’s Trust in Real Estate Services Act, 2002 counts a business as real estate, so a broker paid to market or negotiate your sale must be registered with RECO, which its public registrant search confirms. Lawyers within their legal work and securities registrants are exempt. The Law Society of Ontario and CPA Ontario list lawyers and accountants.
Ontario law counts a business as real estate
If you are looking for a business broker in Ontario, the first fact to know comes from the province’s real estate law. The Trust in Real Estate Services Act, 2002 defines real estate to include businesses, with or apart from their premises, along with the fixtures and stock that go with them. The Act carried the name Real Estate and Business Brokers Act until December 1, 2023, as the Real Estate Council of Ontario records.
The Act defines a trade just as widely. It reaches a sale itself and any act or negotiation in furtherance of one. Section 4 then requires anyone who trades in real estate to be registered, so a person paid to market or negotiate the sale of your business needs a registration with RECO, the regulator that administers the Act.
Two sections back the rule. Under section 9, a person can sue for a fee on a trade only if they were registered or exempt when they did the work. Under section 40, an individual convicted of an offence under the Act faces a fine of up to $50,000, and a corporation up to $250,000.
This page is about the people. The general comparison between brokers and advisors is in business broker or M&A advisor, and the province’s tax and employment rules are in selling a business in Ontario.
The exemptions that reach a business sale
Section 5 of the Act exempts certain people from registration. Four of them come up when a business changes hands.
- A lawyer, whom the Act calls a solicitor of the Superior Court of Justice, is exempt where the trade is itself a legal service or arises directly out of one. If a lawyer offers to find buyers as well, ask how that work fits the exemption.
- A person registered under Ontario’s Securities Act is exempt where the trade is part of that person’s business in connection with a trade in securities. An advisor who relies on this clause should be able to show you the securities registration.
- People acting under a court order or a bankruptcy statute are exempt, and so is an executor selling under the terms of a will.
- An owner trading their own interest is exempt, which is why you may sell your business yourself.
The Act defines a business as an undertaking carried on for profit, including any interest in it. Its exemptions turn on who the person is. If someone tells you that a sale of your company’s shares falls outside the Act, ask which clause of section 5 they rely on and have your own lawyer read it.
The statements an Ontario registrant gives the buyer
Ontario adds a duty that applies once a registrant negotiates the sale for you. Section 21 of Ontario Regulation 567/05 requires the registrant to give the buyer three statements, signed by you or for you, before a binding agreement of purchase and sale is made.
- 01The first is a profit and loss statement for the previous 12 months, or for the period since you acquired the business.
- 02The second sets out the assets and liabilities of the business.
- 03The third lists the assets connected with the business, fixtures included, that stay out of the sale.
The third statement carries a consequence. Where the list is missing and the agreement is silent about an item, the regulation deems that item included in the sale. Take, as an illustration, a company truck you planned to keep: it stays yours when it appears on the list or the agreement names it.
The buyer may instead sign that they have read a sworn statement from you covering the lease and the liabilities, along with whether the books were made available, which replaces the first two statements. A buyer’s review asks for far more, as the due diligence checklist shows.
How Ontario lets a broker set the fee
Section 36 requires the fee payable to a brokerage on a trade to be an agreed amount or a percentage of the sale price, and it allows a combination of both. The same section bars a fee worked out on the gap between the asking price and the sale price. A broker who offers to keep everything above a set figure is therefore proposing an arrangement the Act prohibits.
Section 33 protects you if you change brokers. While a listing agreement with one brokerage is still running, a second brokerage that knows of it can claim a fee from you only with your written agreement.
Compare quotes in dollars at the price you expect, with any retainer added in. What it costs to sell a business sets out the common fee structures and the professional bills that sit beside them.
The professionals who work beside the broker
An Ontario lawyer reviews the letter of intent and drafts or negotiates the purchase agreement. The Law Society of Ontario’s Lawyer and Paralegal Directory shows whether a person is or was licensed and their practising status, and it can be searched by area of law.
Your accountant shapes the tax side, from the lifetime capital gains exemption to the year each payment lands. CPA Ontario keeps public directories of its members and firms, with a separate one for holders of a Public Accounting Licence. CPA Ontario notes that the directories include former members and licensees as well, so read the status on each record.
Where a number must hold up in front of a buyer or a court, owners turn to a Chartered Business Valuator. The CBV Institute runs a directory of CBVs that can be searched by location and specialty. Listing in it is voluntary, and the Institute describes it as a directory rather than an endorsement. When to hire a business valuator explains what a formal report adds.
A checklist for anyone you hire in Ontario
| Who | Where to check | The question to ask |
|---|---|---|
| A broker or M&A firm that markets or negotiates your sale | RECO’s registrant search, for the brokerage and for the person you deal with | Which brokerage are you registered with, and when does your registration expire? |
| Anyone who says RECO registration is unnecessary for them | Section 5 of the Trust in Real Estate Services Act, 2002 | Which clause of section 5 covers you, and does it cover this kind of sale? |
| Your lawyer | The Law Society of Ontario directory | Have you acted for a seller of a business this size, and who drafts the purchase agreement? |
| Your accountant | CPA Ontario’s member and firm directories | Do my shares qualify for the capital gains exemption today, and what would change that? |
| A valuator | The CBV Institute directory | Is this a formal valuation report, and who is it written for? |
RECO’s registrant search shows whether a registration is active and when it expires, and for a brokerage it names the broker of record. It also lists charges and disciplinary action from the last 60 months, and a separate box searches people whose registration ended in the past ten years.
Before you sign an engagement, ask these questions about the fee as well.
- Is the fee an agreed amount or a percentage of the price, as section 36 requires?
- What do I owe if the business stays unsold, including any retainer or listing fee?
- Who prepares the three statements under section 21, and who checks the list of excluded assets?
- Do you act for the buyer as well as for me?
Before the first meeting
Each person on this list charges for their time or takes a share of the price, so it helps to know your range before you meet them. InvestDeal works on a single fee of five percent of the sale price, paid on closing, and its first valuation is free and anonymous. The Quick AI valuation gives that range in a few minutes, before you give anyone your name.
Owners whose business also operates in another province can read the matching guides for British Columbia and Alberta.
The provincial tax and regulatory requirements, regions and buyers are set out on selling a business in Ontario.
Fee structure, buyer outreach and disclosure are compared in InvestDeal compared with a business broker.
Questions owners ask
- Does a business broker in Ontario need to be registered?
- Yes. The Trust in Real Estate Services Act, 2002 defines real estate to include businesses, and section 4 requires anyone who trades in real estate to be registered with the Real Estate Council of Ontario. RECO’s public registrant search shows whether a registration is active, along with any discipline from the last 60 months.
- Who is exempt from RECO registration when a business is sold in Ontario?
- Section 5 of the Act exempts a lawyer where the trade is a legal service or arises directly out of one, and a person registered under the Securities Act where the trade is part of a securities business. People acting under a court order are exempt as well, and so is an owner selling their own interest.
- How can an Ontario business broker charge a fee?
- Section 36 of the Act requires the fee to be an agreed amount or a percentage of the sale price, and it may combine the two. It bars a fee based on the gap between the asking price and the sale price. Compare quotes in dollars at the price you expect, with any retainer added.
- What must a broker give the buyer when selling an Ontario business?
- Ontario Regulation 567/05 requires a registrant acting for the seller to give the buyer, before a binding agreement, a profit and loss statement for the last 12 months and a statement of assets and liabilities. A list of the assets that stay out of the sale goes with them, and an asset missing from that list is deemed included where the agreement is silent.