The ultimate guide to selling your business

Selling a business can be daunting, especially for those doing it for the first time. The process is often lengthy, and the back-and-forth negotiations can be exhausting. That’s why it’s helpful to seek advice from experienced professionals who can provide valuable insights and guidance.

If you plan to buy or sell corporate assets, you must be aware of the implications associated with the type of transaction you are considering.

Whether you own a large corporation or a small business, your corporate assets are likely to be valuable and significant to you. Therefore, planning and preparing meticulously before purchasing or selling is crucial.

It is highly recommended that you seek legal advice before buying or selling any corporate assets. A lawyer specializing in corporate law can provide guidance on various types of sales, liabilities, taxes, and market values.

Asset sales and share sales

When considering a company, deciding between an asset or a share sale is essential.

Asset sales

An asset sale is when only the company’s tangible and intangible assets are purchased. This method allows for the acquisition of corporate property without taking on any previous company debts or facing tax implications. It also provides the highest tax benefit for the purchaser by avoiding stamp duty land tax (SDLT), which can be a substantial additional cost in a corporate sale.

Asset sale prices are often set slightly higher than share sale prices. This extra cost to the buyer is offset by possible recapture income.

Recapture income

Recapture income is the difference in value between the property purchased by the buyer and the depreciated value of these assets. Often, a seller will sell an asset for less money than its recorded value; this difference is the recapture income.

When participating in an asset sale, there are possible downsides for the buyer including the following:

• Continuity issues – suppliers may bail or renegotiate terms, brand may lose reputation
• Employee impact – staff turnover, or job loss
• Customer confusion – may impact customer trust and loyalty
• Regulatory Compliance – struggle to cope with regulations

An important consideration is employee and freelancer contracts. These terms typically remain the same as they were under the ownership in which they were set. Therefore, it can be difficult for the buyer to alter contractual obligations after the sale.

Share sales

A share sale occurs when all the business or assets are sold to the buyer in their entirety—everything from the business’s registered name to its debts and tax liabilities.

Selling a business can be done through different methods, including selling shares. This method benefits sellers in that they can enjoy a lifetime capital gains tax exemption, which means they won’t have to pay any tax on the sale. That’s why it’s the preferred transaction for sellers looking for an exit strategy.

However, buyers of share sales have to take responsibility for all outstanding taxes, whether they incurred them before or after becoming owners. Therefore, share sale buyers must seek legal advice to better understand any potential legal or tax issues associated with the business.

As a new owner, being aware of your liabilities is essential. A specialized legal firm can conduct thorough due diligence to identify any issues, which will help you negotiate a better deal. The business’s liabilities will affect its assets’ value, giving you more negotiation leverage. Knowing these liabilities will also help you avoid unpleasant surprises after the sale.

Seek legal advice

It is essential to have the proper knowledge when negotiating, whether buying or selling corporate assets.

Seeking expert legal advice before making any transactions is essential. This will equip you with the information to secure the best deal possible.