Can I Sell My Limited Company?

If you’re a business owner, you might eventually consider selling your limited company. Whether you’re looking to retire, move onto new ventures, or cash out on your hard work, selling your company can be an excellent option. However, before taking any steps, it’s important to understand the process, legalities, and financial implications involved.

In this blog post, we’ll cover everything you need to know about selling a limited company, including how to prepare your business for sale, the different methods of selling, and the legal requirements you must comply with. By the end of this guide, you’ll have a clear understanding of how to approach selling your business successfully.

Can You Sell a Limited Company?

Yes, you can sell your limited company. A limited company is a separate legal entity, meaning it can be transferred to new owners through a sale. The process typically involves selling the shares of the company, which essentially transfers ownership of the business. When you sell your company, you are selling the entire business (including assets, liabilities, contracts, and more), not just individual assets.

There are two main ways to sell a limited company:

• Selling the shares (share sale)
• Selling the assets (asset sale)

Let’s dive deeper into both options so you can decide which is the best route for you.

Share Sale: The Most Common Method

A share sale involves selling the shares in your company to a new owner. When you sell shares, the buyer takes on ownership of the entire company, including its assets, liabilities, contracts, and obligations. This is the most common method of selling a limited company.

Key Considerations for Share Sales:

• Transfer of Ownership: The buyer acquires all shares in the company, which means they inherit full control of the business, including any existing liabilities and obligations.
• Due Diligence: The buyer will often conduct a thorough due diligence process, reviewing your financial records, tax returns, liabilities, contracts, and more. This process ensures they are aware of any risks associated with purchasing your business.
• Tax Implications: In the case of a share sale, you’ll likely pay capital gains tax (CGT) on the profits made from the sale of your shares. However, certain reliefs may be available, such as Entrepreneurs’ Relief (now called Business Asset Disposal Relief), which can reduce the CGT rate to 10% on qualifying gains.
• Speed and Simplicity: Share sales are often quicker and simpler than asset sales because the business continues as a going concern without any need to transfer individual assets, contracts, or employees.

How to Sell Shares in a Limited Company:

• Valuation: First, you’ll need to determine the value of your company. This is usually done by assessing your company’s assets, liabilities, earnings potential, and market conditions.
• Agreement: Once a price is agreed upon, you’ll need to draw up a sale agreement that outlines the terms of the sale, including the purchase price, any contingencies, and the timeline for transferring shares.
• Transfer of Shares: The sale of shares is typically documented through a share transfer form and filed with Companies House.

Asset Sale: Selling Business Assets Individually

An asset sale is an alternative method where the buyer purchases specific assets of the business, rather than the entire company. This could include things like property, equipment, inventory, intellectual property, and customer contracts.

Key Considerations for Asset Sales:

• Selective Sale: Unlike a share sale, an asset sale allows the buyer to select specific assets, meaning they can avoid taking on certain liabilities or contracts they do not want.
• Liability Concerns: The buyer may only take on liabilities related to the assets they purchase, which can make an asset sale a more attractive option for the buyer, particularly if the company has significant debts.
• Tax Implications: Asset sales may result in higher tax liabilities for the seller, as the proceeds from the sale of assets are typically subject to income tax, rather than the more favourable capital gains tax. However, if the assets are sold at a loss, there may be opportunities for tax relief.
• Complexity: Asset sales can be more complex and time-consuming than share sales, as each asset must be transferred individually, along with any related contracts, licenses, or permissions.

How to Sell Business Assets:

• Valuation: You will need to assess the value of the business assets you intend to sell. This can involve appraisals of property, equipment, and intellectual property.
• Agreement: A sale agreement will need to be drafted, outlining the assets to be sold, the purchase price, and any terms and conditions of the sale.
• Transfer of Assets: The sale will require formal transfer documentation for each asset sold, including legal documents for property, intellectual property, and employee contracts.