Selling your business is one of the most significant decisions you'll make as a founder or owner. Whether you're planning your exit years in advance or responding to a sudden opportunity, understanding the legal and commercial steps involved is essential to getting the outcome you want.
This guide is for business owners preparing for a sale in the UK. It walks you through each stage of the process - from preparing your business for sale and finding a buyer, to agreeing terms, managing due diligence, and understanding your tax responsibilities.
If you're thinking about selling your business and want confidence you're doing it right, our experienced M&A lawyers are here to support you through the sale process.
Jump to:
- Preparing your business for sale
- How to find a buyer for your business
- Different types of business sales and what to consider before selling
- How to agree the terms of your business sale
- Understanding the business purchase agreement
- Tax and regulatory considerations when selling your business
- Disclosing information during due diligence: key steps to success
Preparing your business for sale
Think like a buyer
To maximise value and reduce avoidable tax leakage, it helps to view your business through a buyer’s lens. Buyers typically seek profitable, well-managed businesses with growth potential and clean financial records.
Clarify your goals
Know what you want from the sale. Be emotionally prepared for the complex and time-consuming process, and keep your goals clear to stay focused on achieving them.
Maintain customer relationships
Ensure customer records, payment details, and outstanding invoices are up to date. A strong customer base adds value to your business. Also, reach out to parties that may need to consent to the sale early, such as shareholders, landlords, or suppliers.
Build your support team
In addition to lawyers and accountants, you may need a valuation expert or broker to help navigate the sale process.
Be transparent with employees
Communicate carefully with employees, particularly where there are share incentive plans in place. Timing and messaging matter. In some cases, early disclosure may be legally required, but in others it can create unnecessary uncertainty or risk. Legal advice can help you manage communications, incentive arrangements, and any employee consents in a way that protects value and avoids disputes.
Prepare your information pack
Gather key documents such as recent financial statements, asset lists, leases, contracts, customer and supplier details, and an organisational chart.
How to value your business for sale
Before inviting offers to buy your business, ensure you know its value. You can either value it yourself or hire a professional valuer. This process will also help you assess your business's market position, financial strength, and potential risks or opportunities for growth.
Business valuations can be obtained from accountants, business brokers, or investment firms. Be prepared to provide 3 years of financial data, with clear and organised records, including receipts for all operational and non-operational expenses.
Valuation methods vary, but one common approach is using a multiple of EBITDA, which reflects the company’s income-generating ability. Other factors, such as asset value and the sale price of comparable businesses, will also affect the price.
Over-optimistic pricing can deter credible buyers or lead to renegotiations later in the process. Ensure you can justify the price you set.
When is the right time to involve lawyers?
Many sellers wait until a buyer is found before speaking to lawyers, but earlier advice can materially improve outcomes. Legal input is often valuable where there are multiple shareholders, complex contracts, employee incentive schemes, regulatory exposure, or pressure to complete quickly. Early involvement can help identify risks that affect value, shape heads of terms, and avoid delays once due diligence begins.
How to find a buyer for your business
Once you’ve prepared your business for sale and have a valuation, you can market your business. You can accomplish this via a professional such as a broker, or market the business yourself through mainstream or social media, or via your network of contacts. The method you choose will depend on your business sector, where it’s located and its size.
Once you’ve got some interested parties, stay in contact with them to keep the sale process going have them sign a non-disclosure agreement (NDA) before sharing sensitive information, to protect confidential data about your business, customers, employees, and finances. Put all agreements you make with them in writing. If you want to learn more about NDAs, read our guide on how they can protect confidential information.
Different types of business sales and what to consider before selling
If you’re selling a private limited company, you can either sell its shares or its assets. With a share sale, the buyer acquires the shares, and the company carries on business as before. With an asset sale, the buyer gets the assets and any liabilities associated with them.
A share sale represents a clean break for you as the business owner, and it’s less hassle than selling each asset. You will however have to give the buyer certain promises to make good on any risks that emerge post-sale. In a share sale, employees remain employed by the same company, which simply has a new owner. In an asset sale, employees may transfer to the buyer under TUPE, depending on how the business is sold and structured.
With an asset sale, the buyer can usually limit the liabilities they take on, as they choose which assets and contracts to acquire. The selling company may then be wound up, retained as a dormant entity, or used for another purpose, depending on your wider plans. The most common assets to sell are customer lists, equipment and machinery, property, goods, contracts, IPR, goodwill and IT systems. The buyer can choose what assets they take, and from the seller’s perspective, they don’t need to involve the shareholders. The seller may end up paying more tax in an asset sale in terms of corporation and CGT.
If your business is a partnership, you’ll sell business assets rather than shares. This can be more complex than selling a company, as each partner may have different rights and ownership structures.
Finally, it’s also possible to sell a company with financial problems or is technically insolvent. In conclusion, the best way to ensure success when selling your business is to speak to expert advisors from the outset. They will help you lay the foundations for an efficient and fully compliant sale transaction. if you want to learn more, read our answers to common M&A questions from buyers and sellers.
How to agree the terms of your business sale
The terms of a potential deal should be written down clearly so both sides understand what they mean. Terms to include are the proposed timing of the sale, the sale price, what assets are included and how the price will be paid.
If you’re not getting a lump sum up-front, how will installments be made and what will you do if the buyer won’t pay? Will you be required to work in the business, and if so, for how long? Will there be any restrictions on your ability to operate in the same market in the future?
Understanding the business purchase agreement
The business purchase agreement describes the sale terms. The agreement sets out the legal and commercial balance between buyer and seller, allocating risk between you and documenting exactly what has been agreed. Your lawyer will draft and negotiate this alongside you and your team.
Here are some of the essential components of the agreement:
- The price, including any future installments
- Disclosures about the business being sold, including details of the financial performance, ownership structure, and any legal issues
- The condition of the business and any assets
- Employee issues and any disputes
- Lists of assets and liabilities, including property and equipment, IPR and customer lists
- Any pre-conditions to the sale such as obtaining finance, getting approvals or settling disputes
Tax and regulatory considerations when selling your business
Sole traders
If you’ve been a sole trader, close your personal tax affairs. As a first step, let HMRC know you’ve stopped trading and deregister as self-employed. This will bring your Class 2 National Insurance contributions to an end, and you’ll then complete a final self-assessment tax return covering the period up to cessation. Following the sale, you’ll complete your final year’s self-assessment return, plus pay any outstanding tax and NIC,
Partnerships
If you’re a member of a partnership selling their share, you’ll complete your final self-assessment and pay tax and NIC owing. If the partnership is being sold, the nominated partner also fills out a partnership tax return.
Limited companies
If you’re selling up your entire shareholding, new directors will need to be appointed in place of your team, and you’ll need to make certain filings to HMRC and Companies House
Paying CGT
If your company is worth more than you paid for it, Capital Gains Tax will be due on the sale. There may be tax reliefs available that reduce the amount of capital gains tax (CGT) payable, such as Business Asset Disposal Relief, provided specific conditions are met. Eligibility depends on factors like your role in the business, how long you’ve owned the shares or assets, and how the sale is structured.
Disclosing information during due diligence: key steps to success
Disclosing the right information during due diligence is a critical part of the business sale process. Proper preparation ensures you're in the best position to negotiate a favourable deal and successfully complete the transaction. In our article, we break down what’s expected during the disclosure process, why legal expertise is essential, and how being organised and transparent can help you achieve your goals. We also discuss in this article about why disclosure letters are important.
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