Selling a business is rarely a straightforward process. Along the way, there are legal, financial, and tax-related considerations to work through, each of which will have a direct knock-on effect on the value you walk away with and how cleanly the transaction will complete.
Before the process begins, it is worth being clear on what a good outcome looks like for you. Are you prioritising maximum sale price? Speed of completion? The future of your staff? A clean break with no ongoing involvement?
If you are asking yourself “should I sell my company?”, the honest answer will depend less on market conditions than you might think, and more on what you actually want from the outcome. This is what will often shape the structure of the deal, the type of buyer you target, and the pace you progress at.
In this guide, Paul Matthews, Director and Head of the Corporate and Commercial Team at WHN Solicitors, walks you through the entire process of selling a business in the UK. From the initial structural decisions through to due diligence, the sale agreement, and tax.
Paul has spent over two decades advising owner-managed businesses, family companies, and SME founders across Lancashire, Greater Manchester, and beyond on business sales and acquisitions. He is perfectly placed to guide you through the many complexities of selling a business.
If you would like to speak with Paul, or another member of the Corporate and Commercial team, visit our dedicated page or call 0161 761 8075.
Share Sale or Asset Sale: Which Structure Suits You Best?
When it comes to selling a limited company, there are two main routes available to you: a share sale or an asset sale. This is the first structural decision you will face, and it is one of the most consequential. The approach you take will affect the complexity of the transaction, your personal tax position, what happens to your employees, and which existing contracts transfer to the buyer and which do not.
Getting this decision right, ideally before you approach any buyer, is one of the clearest ways a corporate solicitor can add value at the start of the process.
In a share sale, the buyer acquires the shares of the company from shareholders. The company continues as-before with all the same contracts, employees, and trading history continuity in-place.
Selling a limited company by way of a share sale is generally considered to be simpler and more tax-efficient for the seller. The downside of it is that the buyer takes on the full history of the company. This includes any risks or liabilities they later discover.
This is why buyers in share sales typically require warranties and indemnities from you, as the seller, before they will go ahead with it.
In an asset sale, specific assets are transferred rather than the company itself. The buyer chooses which assets to take. This significantly limits the liabilities they inherit.
For the selling party, an asset sale can leave you saddled with a hollow shell company as well as a steeper tax bill.
In an asset sale, the Transfer of Undertakings (Protection of Employment) Regulations 2006, known as TUPE, will usually apply to employees. TUPE doesn’t apply to a share sale, because the employer doesn’t change.
Under TUPE, both seller and buyer are required to inform affected employees before completion. Where either party plans to make changes affecting those employees after the transfer, such as changes to roles, terms, or working arrangements, a formal consultation process must also take place beforehand.
If you are selling your limited company, taking early legal advice on which structure best suits your specific position and situation is essential. The correct answer will depend on your balance sheet, the buyer’s requirements, and your personal tax situation, among other potential factors.
Preparing Your Business for Sale
Preparation will be where a majority of the value in the sale is either won or lost. The best tips for selling a business all point to the same thing: start the process earlier than you think you will need to. Buyers will scrutinise absolutely everything, and anything that seems unclear or legally untidy will give them grounds to attempt to lower their offer, or even walk away entirely.
Here is what to do when selling a business before you approach any buyer.
- Statutory Books & Companies House Records: These are among the very first things buyers check. Directors are legally required to maintain accurate company registers at all times, so any gaps will need resolving before the process begins.
- Contracts: Every significant agreement held by your business, be it with customers, suppliers, landlords, or software providers, will need reviewing. This process should establish whether the contracts transfer to the buyer, whether they contain change of control clauses, and if any consents are required before completion.
- Intellectual Property: Trademarks, copyright, domain names, and proprietary systems must be owned by the company, not by an individual director or third party, or the buyer will be unlikely to want to pay full value for them.
- Leasehold Premises: If the business occupies a leasehold property, you should check the lease for any alienation clauses and existing breaches. Landlord consent could be required to assign the lease.
- Legal Proceedings: Any outstanding (or threatened) litigation must be reviewed, and a path to resolution should be identified prior to the sale process beginning.
Preparing to sell a business can take months. Generally, the companies that proceed quickest through the sale process are the ones that have done the groundwork in advance and afforded themselves plenty of time to prepare appropriately.
Before you go to market, you will also need a clear view of what the business is worth. Valuations are typically carried out by a specialist accountant or business broker using methods such as an EBITDA multiple, asset-based valuation, or comparable transaction data from similar sales in your sector.
While WHN Solicitors does not provide valuations, we do regularly work alongside accountants and financial advisers to ensure the deal structure accurately reflects the agreed valuation and protects the seller’s position through to completion.
Finding a Buyer and Managing Confidentiality
Once a business is prepared and valued, the crucial next step is to identify interested buyers. Trade buyers, private equity firms, management teams, and sole investors all represent distinct profiles. The right buyer is not always the one offering the best price. For example, a trade buyer may offer more but expect an earn-out, or a private equity firm may move faster but impose stricter post-sale conditions.
Identifying which type of buyer suits your exit goals should be seen as a key part of the sale process, and not an afterthought.
The most important practical advice on selling a business we can give you at this stage is to protect confidentiality from the outset and throughout.
If the wrong people learn the business is for sale before a deal is finalised, the consequences can be damaging. Staff may look to leave, suppliers could let contracts lapse, and customers might opt to take their business elsewhere.
If you wish to know how to sell a business privately, the answer is a carefully managed process involving anonymised marketing materials, a non-disclosure agreement (NDA) signed by all prospective buyers before any detailed financial or operational information can be shared, and tight controls around who inside the business knows what is happening and when.
If employees are involved, TUPE information and consultation obligations will apply in the case of asset sales. In a share sale, there is no legal obligation to notify employees in advance. However, managing internal communications extremely carefully is always advisable.
Heads of Terms: What They Cover and Why They Matter
Once a buyer has emerged and both parties have agreed on the broad shape of a deal, the next step is heads of terms, sometimes referred to as a letter of intent. Heads of terms is the document that records the key commercial terms agreed in principle prior to more detailed legal work beginning.
Heads of terms typically cover:
- The proposed price.
- The structure of the transaction.
- What is included in the deal.
- Planned timetable for the deal.
- The exclusivity period.
Heads of terms are not usually legally binding, so either party can still walk away. The exceptions are normally the exclusivity and confidentiality clauses: during the exclusivity period you can’t negotiate with other buyers, and breaching either clause can lead to a claim against you.
Ultimately, your legal advisers should always review heads of terms before you sign anything. To avoid any surprises during due diligence, it is also recommended that you identify any contracts that will need formal assignment or novation.
Due Diligence and Disclosure: What To Expect
Due diligence is the process by which the buyer verifies everything they have been told regarding the company before committing to the purchase. It is also the stage in the process where, if preparation has not been done properly, most deals either stall or fall apart entirely.
The due diligence process involves the buyer and their lawyers sending detailed written questionnaires covering legal, financial, commercial, and operational areas. It is the responsibility of you and your legal team to respond with evidence. This will run in parallel with other aspects of the process of selling the business, including negotiation of the sale agreement.
Running alongside due diligence is the disclosure process. Your main protection is the disclosure letter, a formal legal document setting out anything that doesn’t match the warranties you’re giving. This limits your exposure to warranty claims post-completion.
If something were to go wrong after the sale, and you did not disclose it, the buyer may be able to claim against you under the warranties. If it was in the disclosure letter, your exposure is reduced significantly.
What to do when selling a business at this stage: keep your legal team informed of any changes to the business throughout the entire process. Anything that may affect the warranties you are giving will need capturing in the disclosure.
The Sale Agreement: What it Contains and How it Protects You
A sale agreement is the definitive legal document recording everything agreed between the parties. For a share sale, this will be a share purchase agreement. For an asset sale, it will be an asset purchase agreement. A sale agreement is by no means a formality. It is the legal instrument that determines the extent of your exposure once the deal has closed.
Your sale agreement will cover:
- The purchase price.
- Adjustments.
- Warranties and indemnities you are giving to the buyer.
- Conditions that must be satisfied prior to completion.
- Restrictions on activities post-completion.
- The mechanisms of how the transaction completes.
Warranties are statements of facts about the company. As a result, if they were to turn out to be inaccurate, the buyer would be eligible to claim against you for losses incurred. Therefore, negotiating the scope of these warranties, and ensuring the disclosure letter is as accurate and complete as possible, is one of the most important steps in the whole process.
Ultimately, the best way to sell a company is with a solicitor who has negotiated these documents many times and understands where the inherent risks are.
Tax When Selling a Business: What You Need to Know
The tax treatment that comes as part of a business sale will depend on the structure of the transaction, the legal form of the company, and your personal circumstances. For shareholders selling a limited company by share sale, Capital Gains Tax (CGT) is typically the primary consideration.
Business Asset Disposal Relief can reduce the CGT rate on qualifying gains to 18%, against the 24% higher rate that would otherwise apply, on up to £1 million of gains over your lifetime. However, the conditions for eligibility are highly specific, referring to:
- Your role in the business.
- How long you have owned your shares.
- How the sale is structured.
Tax advice from a specialist should always happen before heads of terms are agreed, not after. This is because the structure of the deal and any available reliefs can have a significant effect on net proceeds from selling a business.
Getting tax advice too late in the sale process is one of the most common and costly mistakes we see sellers make.
Frequently Asked Questions About Selling a Business
How long does it take to sell a business in the UK? A straightforward sale of a small business typically takes between three and six months from instruction through to completion. More complex transactions involving multiple shareholders, property, regulatory considerations, or earn-out arrangements, can take up to 12 months, or even longer.
The single biggest driver of delays we see is poor preparation. Companies that enter the sale process with clean records, organised contracts, and resolved legal issues complete significantly quicker.
What are the best tips for selling a business? Some of the best tips for selling a business include: Begin preparations at least twelve months before you intend to go to market. Get your statutory books, contracts, and IP ownership checked early. Appoint a solicitor before you approach buyers, not after. Get a realistic valuation from a specialist with actual sector experience. Sign NDAs before sharing financial information. Take tax advice before you agree heads of terms.
How do I sell a limited company? You can sell a limited company either by selling the shares in it (a share sale), or by selling its underlying assets (an asset sale). Share sales are usually considered simpler to complete and more tax-efficient for the seller, while an asset sale offers the buyer greater control over what they take on.
Which route is right for you will depend on the nature of your business, and what the needs of the buyer are. A corporate solicitor will be able to advise you on the ideal structure if you are ever unsure.
How do I sell a business quickly? Speed of sale comes from proper preparation, not from cutting corners in the process. The businesses that complete quickest are those with clean documentation, a resolved legal structure, and no undisclosed issues ready to surface during due diligence.
Appointing your solicitor and accountant early, having your statutory books in order, and being transparent with buyers from the outset and throughout will minimise the primary sources of delay.
What happens to employees when a business is sold? During a share sale, employees will remain employed by the same company. There is no change to employment terms, just new owners. During an asset sale, employees will usually transfer to the buyer under TUPE, retaining existing terms and conditions. TUPE imposes specific information and consultation obligations for both seller and buyer.
Failure to comply with TUPE obligations can result in tribunal claims.
Talk to a Corporate Solicitor About Selling Your Business
Selling a business is a significant legal transaction and the decisions made in the early stages surrounding structure, valuation, confidentiality, and tax will have a direct bearing on the outcome.
Taking legal advice before you approach buyers, not after, is the single most effective way to protect your position.
While there is no legal requirement to use a solicitor to sell a business, the documentation required (warranties, indemnities, disclosure letter, and the sale agreement) means it carries significant financial risk. For any transaction of material value, the cost of poorly drafted or incomplete documents will often far exceed the cost of receiving proper legal advice from the outset.
Paul Matthews is a Director and Head of the Corporate and Commercial Team at WHN Solicitors. He holds a law degree from the University of Birmingham and spent seventeen years as a partner at a Manchester city centre firm before joining WHN in 2016.
Paul specialises in company and business sales and acquisitions, management buyouts, shareholder agreements, and joint ventures, and has extensive experience advising owner-managed businesses, family companies, and SME founders across Lancashire and Greater Manchester.
WHN Solicitors is a multi-office firm with teams based in Accrington, Bacup, Blackburn, Bury, Clitheroe, Great Harwood, Haslingden, Rawtenstall, and Salford.
To discuss your situation with Paul or another member of the Corporate and Commercial team, call 0161 761 8075, email paul.Matthews@whnsolicitors.co.uk, or fill in our contact form and request a callback.
