Selling A Business – What You Need To Know

Before You Start

The process is not just about agreeing a price: it involves preparing the business for scrutiny, choosing the right sale structure, managing legal and tax risks, negotiating protections and ensuring a smooth handover. With early planning and the right professional support, sellers can improve value, reduce delays and avoid unpleasant surprises during the transaction.

We explain the key legal and commercial considerations when selling a business in England and Wales.

Key points when selling a business

At a glance…

• Prepare financial and legal records early
• Understand share sale vs asset sale structures
• Anticipate buyer due diligence
• Review employee and property issues
• Obtain tax advice before agreeing terms
• Use experienced corporate solicitors

Get the Business Sale-Ready

Preparation often has a direct impact on price and deal certainty. Buyers will expect clear financial records, written customer and supplier contracts, properly documented employment arrangements, evidence of ownership of assets and intellectual property, and a sensible explanation of any historic disputes or liabilities. If the business relies heavily on key individuals, particular customers or informal arrangements, those issues should be addressed before approaching buyers.

A good pre-sale review should cover accounts, tax records, company registers, property documents, data protection compliance, licences, insurance policies, employment records, contracts, finance arrangements and any known claims or complaints. The aim is to identify problems before the buyer does, then either fix them or prepare a clear disclosure.

Decide Between a Share Sale and an Asset Sale

If the business is operated through a limited company, the sale will usually be structured as either a share sale or an asset sale. In a share sale, the buyer purchases the shares in the company, so the company continues to own its assets and remains responsible for its liabilities. In an asset sale, the buyer purchases selected assets, such as goodwill, stock, equipment, contracts, intellectual property and customer records, while the selling company usually remains in place.

Sellers often prefer share sales because they can be cleaner from their perspective and may result in proceeds being paid directly to shareholders. Buyers may prefer asset sales because they can choose what they acquire and may avoid taking on historic liabilities. However, asset sales can require additional steps, such as assigning contracts, transferring employees, obtaining landlord consent or dealing with VAT and capital allowance points. The right structure should be agreed with legal and tax advisers before heads of terms are signed.

Understand Valuation and Payment Terms

The headline price is only part of the commercial deal. Sellers should understand how the price has been calculated, whether it is fixed or subject to adjustment, and when the consideration will actually be paid. Common mechanisms include completion accounts, locked-box pricing, deferred consideration, earn-outs and retentions. Each can materially affect risk and cash flow.

Where part of the price is deferred or linked to future performance, sellers should consider security for payment, control over the business during the earn-out period, accounting policies, dispute mechanisms and what happens if the buyer changes the way the business is run after completion.

Prepare for Due Diligence

Due diligence is the buyer’s investigation into the business. The buyer will usually ask detailed questions and request documents covering finance, tax, commercial contracts, employees, property, litigation, intellectual property, IT systems, data protection, regulatory compliance and insurance. In a share sale, the review is usually wider because the buyer inherits the company with its liabilities. In an asset sale, the review may focus more closely on the assets and liabilities being transferred.

The seller should control the flow of information, usually through a secure data room and a confidentiality agreement. Responses should be accurate, consistent and carefully reviewed. If information is incomplete or misleading, it may lead to renegotiation, indemnity requests, warranty claims or even termination of the deal.

Key Legal Documents

The main transaction document will usually be a share purchase agreement or an asset/business purchase agreement. Before that, the parties often sign a non-disclosure agreement and heads of terms. The final transaction package may also include a disclosure letter, board minutes, stock transfer forms, assignments, novations, landlord consents, consultancy or employment agreements, restrictive covenants and completion deliverables.

Warranties and indemnities are particularly important. Warranties are contractual statements about the state of the business, while indemnities allocate specific known risks. A carefully prepared disclosure letter can protect a seller by qualifying warranties where relevant facts have been properly disclosed.

Employees, Contracts and Premises

Employee issues should be considered early. In an asset sale, employees may transfer automatically under TUPE, depending on the circumstances. This can impose consultation obligations and transfer employment liabilities to the buyer. In a share sale, the employer remains the same company, but the buyer will still want comfort on employment contracts, pay, benefits, disputes, pensions and compliance.

Key contracts should also be reviewed for change-of-control clauses, assignment restrictions, termination rights and consent requirements. If premises are leased, landlord consent may be needed for an assignment, underlease or change in control. Delays in obtaining third-party consents are a common cause of slippage in business sales.

Tax Planning

Tax should be considered before agreeing the deal structure. The tax outcome may differ significantly between a share sale and an asset sale, and issues can arise around capital gains tax, corporation tax, VAT, stamp taxes, capital allowances, goodwill and extraction of proceeds. Sellers may also need advice on whether any reliefs, such as Business Asset Disposal Relief, are available.

Tax advice should be taken at the start, not after heads of terms are agreed. Once a structure and price mechanism have been recorded, it can be difficult to renegotiate without losing leverage or damaging buyer confidence

Completion and Handover

Completion is the point at which ownership transfers and the buyer pays the agreed consideration, subject to the terms of the agreement. The seller should prepare a completion checklist covering approvals, signed documents, funds flow, resignations or appointments, keys, passwords, statutory books, notifications and practical handover arrangements.

After completion, sellers may still have obligations. These can include assisting with transition, observing restrictive covenants, supporting customer introductions, dealing with post-completion adjustments and responding to warranty or indemnity claims within agreed time limits.

Common Pitfalls to Avoid

• Agreeing heads of terms before taking legal and tax advice.
• Overstating financial performance or failing to explain unusual trends.
• Leaving contracts, IP ownership or employee arrangements undocumented.
• Ignoring consent requirements in key customer, supplier or property contracts.
• Giving broad warranties without proper disclosures or liability limits.
• Accepting deferred consideration or earn-out terms without sufficient protections.
• Failing to plan for the practical handover after completion.

A successful business sale depends on preparation, clear structure and disciplined risk management. Sellers should understand what they are selling, how the price will be paid, what information the buyer will require and what liabilities may remain after completion. Taking early legal, tax and accounting advice can help maximise value, reduce delay and protect the seller’s position throughout the transaction.

Wilson Browne’s Corporate Team advises business owners across Northamptonshire, Leicester, Milton Keynes and throughout England and Wales on business sales, management buyouts and company acquisitions.