If your business is a limited company, there are two ways to sell it. In a share sale, you sell your shares and the buyer takes ownership of the company itself, with everything inside it. In an asset sale, the company sells its business and assets to the buyer, and you still own the company afterwards. The headline price can be the same and the outcome very different.
A share sale
- The buyer acquires the whole company: its contracts, staff, assets, and its history and liabilities, known and unknown.
- Because the buyer inherits the past, it relies more heavily on due diligence and on the warranties and indemnities you give in the sale agreement.
- The proceeds come to you personally, usually taxed as a capital gain. Business Asset Disposal Relief may apply if you meet the conditions; see our guide to the relief.
- Contracts usually stay in place, because the company that holds them has not changed, although some contracts contain change-of-control clauses that need checking.
An asset sale
- The buyer chooses which assets and liabilities to take, and leaves the rest in your company.
- Employees normally transfer to the buyer automatically on their existing terms under the TUPE regulations.
- Contracts, leases and licences usually have to be transferred one by one, often with the other party's consent.
- The sale proceeds go to the company, not to you. The company may pay tax on any gain, and getting the money out to you can mean a second layer of tax. Ask your tax adviser to compare the routes before you agree one.
Why it matters early
Buyers often prefer asset sales because they reduce risk; sellers often prefer share sales because they are cleaner and usually more tax efficient. Which route you take affects what the price really means, so it belongs in the heads of terms, agreed alongside the price, not decided later.
The best way to make a share sale acceptable to a buyer is preparation: clean records, documented contracts and few surprises in due diligence. A buyer who trusts the company's past has less reason to insist on buying only its assets.
This guide is general education, not tax or legal advice. Take advice from your own advisers on your circumstances.
Common questions
Do sellers usually prefer a share sale?
Often, yes. A share sale is a cleaner exit: the buyer takes the company with its history, and the proceeds come to you as a capital gain, which may qualify for Business Asset Disposal Relief if the conditions are met. Your tax adviser will confirm your position.
Why would a buyer want an asset sale?
To choose what it takes on. In an asset sale the buyer picks the assets and liabilities it wants, which reduces the risk of inheriting problems from the company's past.
General information to help you prepare, not tax, legal or financial advice. Rates and rules change; check the current position and take advice on your own circumstances.
