Summary
- Decide early why you are selling and which structure you want, because a share sale transfers the company with its assets and liabilities, while an asset sale transfers only the assets you choose.
- The structure drives your tax, because a share sale attracts capital gains tax on your personal disposal, while an asset sale taxes the company on the gain and taxes you again when you extract the proceeds.
- Prepare before you go to market by tidying financial records, reviewing contracts for transferability, and resolving disputes and compliance issues that would surface in due diligence.
- LegalVision, a commercial law firm, helps business owners structure and document a sale and manage the due diligence process.
- Sellers who assemble their documents before a buyer asks for them shorten the timetable and protect the price.
Tips for Businesses
Decide your structure before you approach buyers, and take tax advice on it first, because a share sale and an asset sale leave very different amounts in your hands. Assemble your contracts, financial records, statutory registers and employment documents into one data room now. Get a non-disclosure agreement signed before you share anything sensitive. If you need help selling your company, our experienced business sale and purchase lawyers can assist.
Selling the company you built is usually a once-in-a-lifetime transaction, and most owners approach it in the wrong order. They find a buyer, agree on a price, and only then discover that the structure the buyer wants costs them several hundred thousand pounds more than the one they assumed. Two decisions shape everything else. The first is whether you sell your shares or the company sells its assets, which determines your tax, what liabilities go with the business, and whether your employees transfer automatically. The second is how ready your paperwork is when due diligence starts, because every gap a buyer finds becomes either a delay or a discount. This article sets out the key steps in selling your company, covering your objectives, the choice between a share sale and an asset sale, preparing the business, assembling your advisers, due diligence and tax.
Set Your Objectives and Expectations
Firstly, you should set out your objectives and expectations. Knowing why you are selling your business is essential, as a potential buyer is likely to want to know the reason when they first start discussions on the sale.
Similarly, suppose you are selling your business because you think it is the right time to implement an exit strategy and make a profit. In that case, financial statements will still be relevant to potential buyers as it will influence your business valuation.
Set Your Method for Selling
There are usually two ways of conducting a business sale.
The first way is through a share sale. This is where you offer your shares to a buyer. The buyer acquires the shares and takes control of the company. This includes the company’s assets and liabilities.
The second way is through an asset sale, where you offer the company’s assets to a potential buyer.
Your business valuation will reflect your assets minus your liabilities. Your business assets will include:
- intellectual property;
- physical property;
- stock;
- leases; and
- goodwill.
Prepare Your Business for Sale
Before taking your business to market, it is important to ensure that it is presented in the best possible light. Buyers are generally attracted to businesses with organised financial records, documented operating procedures, and stable customer relationships. Consider reviewing your existing contracts with suppliers, customers, and employees to ensure they are current and transferable where appropriate.
You should also identify and resolve any outstanding legal disputes or compliance issues before negotiations begin, as these can reduce buyer confidence or delay the transaction. Taking the time to prepare your business thoroughly can strengthen your negotiating position, increase buyer interest, and contribute to a smoother sale process.
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Put a Team Together
If you are a business owner, it is usually a good idea to seek legal advice from a lawyer and professional advice from a business expert. This can help you create a solid corporate structure for your business, with a sound deal structure, accurate financial records, and appropriate legal documents (such as non-disclosure agreements).
You may also need to hire the services of a broker. Although a broker will usually expect a fee from the proceeds of the business sale, they are highly useful as they can:
- help you save time;
- get a higher price for your business;
- deal with the negotiation for you; and
- find potential buyers through their knowledge of the specific market.
Considering purchasing a UK business? Download this free guide for practical tips on conducting due diligence and reducing risks.
Prepare for Due Diligence
Due diligence is one stage in a business sale process. In this stage, both parties undertake detailed research about the other. The potential buyer can research everything they need to know about your business before setting out an offer, and you can research the buyer to know that they are the right buyer for you (for example, that they will be able to make payments on time).
As part of the due diligence process, you will want to guarantee that you have certain documents ready to be handed over to the potential buyer. These documents may include:
- employment contracts;
- a detailed summary of all of your shareholders;
- all of the properties and assets that will be included as part of the sale;
- tax returns;
- financial statements and financial records; and
- statutory registers, e.g., your registration with Companies House.
“Owners come to me with a price agreed and a structure already conceded. By then the tax outcome is largely fixed, and it is usually the biggest number in the deal. Decide whether you are selling shares or assets before you shake hands, not after.”
Why the Structure You Choose Changes Your Tax Bill
Share sales and asset sales produce very different tax outcomes for a seller, and the gap is usually the largest single number in the deal. On a share sale, you dispose of your shares personally and pay capital gains tax on the gain. Business Asset Disposal Relief can reduce the rate on qualifying gains up to a £1 million lifetime limit, and that rate rose to 14 per cent for 2025 to 2026 and rises again to 18 per cent from 6 April 2026. Gains above the limit attract the main rate, which is 24 per cent for higher rate taxpayers.
An asset sale works differently and usually costs more. The company sells the assets and pays corporation tax on the gain at up to 25 per cent, and you then pay tax again when you extract what remains, whether as a dividend, a salary or a liquidation distribution. Buyers often prefer an asset sale for exactly the reasons that make it expensive for you. Take tax advice before you agree a structure, not after. Our guide on share sale versus asset sale sets out the other differences.
Key Takeaways
If you are selling your business, you will want first to make sure that you know why you are selling your business. This will help set expectations. You will then decide whether it is best to sell your business through an asset sale or a share sale. This will inform your asking price and deal structure, and you should also seek professional advice before drafting any documents yourself. Finally, you want to make sure that you are aware of any tax obligations that you have due to your sale, such as having to pay capital gains tax.
If you need help with selling your business, LegalVision provides ongoing legal support for all businesses through our fixed-fee legal membership. Our experienced business sale and purchase lawyers help businesses manage contracts, employment law, disputes, intellectual property, and more, with unlimited access to specialist lawyers for a fixed monthly fee. To learn more about LegalVision’s legal membership, call 0808 196 8584 or visit our membership page.
Frequently Asked Questions
When should I sell my company?
Ultimately, this is down to your business strategy. If you think it is the right time to sell to make a profit, or if you want to cut your losses, then selling your company might be a good idea.
What is a share sale?
A share sale is when you sell your shares in the company to a buyer, as opposed to picking and choosing certain assets in the company to sell.
How long does it take to sell a business?
The timeframe for selling a business depends on factors such as the size of the business, market conditions, the complexity of the transaction, and how quickly due diligence can be completed. While some smaller businesses may sell within a few months, more complex transactions can take significantly longer. Preparing your documentation in advance can help reduce delays.
Should I require a confidentiality agreement before sharing business information?
Yes. Before providing sensitive financial, operational, or commercial information to a prospective buyer, it is generally advisable to have them sign a Non-Disclosure Agreement (NDA). An NDA helps protect your trade secrets, customer information, and other confidential business data if the sale does not proceed.
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