Can I Sell Part of My Business in England and Wales?

Selling part of your business can be a good idea in certain situations. It can help raise money,  re-strategise and refocus your business or cut costs. There are different ways to sell part of your business, depending on your goal and what you want to achieve. This article will outline some scenarios when you might sell part of your business. It will also explain the process for sale.

When Should I Consider Selling Part of my Business?

Selling your business in portions can be a good strategic decision. Unlike putting your whole business up for sale, selling only a part can help you achieve a longer-term business strategy. 

Re-focusing your Business

After operating your business for a while, you may find that your business has one particularly profitable area. You may wish to focus your resources and review your business strategy in a company’s core area. 

You can do this by selling part of your business. This might be a good idea because you can focus your time and effort on that area to outdo your competitors.

Raising Capital

You may find that you need to raise capital for your business. This can be for various reasons, such as for paying debts or for expanding. Selling part of your business can raise capital without generating more debt. With the capital you raise, you can invest in expanding your business or putting more resources into a profitable area of your business. 

Reducing the Cost of Doing Business

By offloading unprofitable assets, you can streamline your business and reduce overall costs. This can help improve your bottom line. This may also be necessary if you have made an acquisition that has turned out to be unprofitable, and you wish to cut your losses. 

Selling Parts of Your Business to Maintain Share Value

Suppose your company is publicly listed and trades on a stock exchange. If you wish to get rid of the company, you might want to sell off parts of your company slowly rather than all at once. Selling the whole company in one go can reduce shareholder confidence and affect your company’s share price. Selling in parts over a prolonged period could be a good strategic decision. 

How Can I Sell Part of My Business?

There are two main ways of getting rid of part of your ownership in a company. The method you use depends on what you are trying to achieve. The two main options are an asset sale and a share sale. 

Asset Sales

If you are looking to sell a particular part of your business, an asset sale can help you achieve that. An asset is something that your business owns. For example, land, equipment, or intellectual property are assets. Through an asset sale, you can handpick the assets you want to sell and offer them to potential buyers. 

An asset sale can be preferable if:

• you want to offload a specific part of your business; or
• you want to generate capital in exchange for part of your business.

An asset sale usually means that you completely lose control over the asset you are selling. As a result, you should seriously consider whether it is the best way of achieving your goal. For example, you may lease your asset to a potential investor instead. It might be better to retain control over the asset if:

• the asset may become profitable in the long term; 
• you can get a good price for leasing the asset; or
• you do not need to raise capital immediately.

Share Sales

You can also sell a part of your business ownership through a share sale. A share sale is where you offer shares in the company to potential investors. This will dilute your control over the company. Your control will depend on how many shares you decide to sell and whether you give voting rights to the new shareholders. 

A share sale in this way can be good for retaining control of the business while raising capital. Similarly, instead of offloading your company’s assets, you can give control over certain parts of your business to new shareholders. This may be preferable for tax purposes, given that you may have to pay capital gains tax on profits that you make from an asset sale. 

A share sale, on the whole, may be preferable if:

• an asset sale may fetch you a lower price;
• you want to keep the assets as part of the business while still raising capital;
• you would value having new shareholders as part of your business.

Which Method Should I Select?

This depends on your unique business situation. Below, we outline some potential benefits of each method.

Key Takeaways

Whether you should sell part of your business depends on your overall business strategy. Sometimes, retaining your business assets is a good idea. This is especially true if you have put hard work into that part of your business, or you think it may be profitable in the longer term. On other occasions, it may be a good idea to cut your losses and sell an unprofitable asset. Additionally, you should consider tax consequences when deciding between the two.

If you need help with selling part of your business, our experienced business sale lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.

Frequently Asked Questions