When do you pay a business broker's commission?
Business broker commissions in Canada are typically paid at closing when funds change hands, not before or during the sale process. The commission becomes payable when the transaction closes — the date when legal title transfers and purchase funds are delivered.
How payment is collected at closing
Commission is commonly deducted directly from the sale proceeds by the lawyer or notary handling the transaction closing. Payment is typically made by wire transfer or certified funds on the closing date, with the broker's commission coming off the top of the seller's proceeds before you receive the remaining balance.
Broker commissions are subject to GST or HST depending on the province, which is added to the commission amount and remitted by the broker.
Retainer vs. success-fee structures
Most business brokers work on a success-fee-only basis, meaning you pay nothing until the business sells. Some brokers — particularly those handling main street and small business transactions — charge an upfront retainer ranging from $5,000 to $25,000, which is typically deducted from the final commission at closing. Among Advisor Standard profiles with disclosed fee structure information, 12% listed an upfront engagement fee or retainer.
The retainer model is more common for larger transactions or when the broker anticipates significant upfront work to prepare the business for sale. If a retainer is charged, confirm in writing whether it is refundable if the business does not sell.
What happens if the deal falls through
If a deal falls through before closing, the broker generally does not receive a commission unless specific conditions in the listing agreement were met. Most listing agreements include a tail provision requiring commission payment if the seller completes a sale to a buyer introduced by the broker within 6 to 12 months after the listing expires.
In transactions with earnouts or seller financing, some listing agreements specify that commission on deferred payments is due as those payments are received, not all at initial closing. Review your listing agreement carefully to understand when commission is owed on any portion of the sale price paid over time.
This article is for informational purposes only and does not constitute financial, legal, or business advice. Every business sale is different. Before making decisions about engaging an advisor or signing a listing agreement, consult a qualified professional familiar with your specific situation.
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