Selling a limited company UK

June 24, 2023

There are various reasons that you might want to sell your limited company, from retirement, to making a profit, to simply not wanting to run the business anymore. 

You can sell your shares to a third party buyer, or if you have any existing business partners, to them. You might also think about transferring your shares to a family member. 

If you have any business partners, you will need to work together with them to do this. When transferring ownership, you will need to look at the articles of association and any shareholders’ agreement which often include provisions for buying and selling the shares in your company. 

When planning to sell a limited company, you need to consider your shares, assets, liabilities, taxes, professional help and your buyer. 

When asking "how to sell a limited company in the UK?", you should also consider how you’re going to get the business ready for sale.


What to consider when getting ready to sell a limited company

To plan for your business's sale, here are some points to take into account. In order to sell, you could either sell the limited company together with its business or to get your limited company to sell its assets. 

A company's partnership agreement details how shares are distributed.

Share sale

A sale of a limited company happens when the owner sells the shares. If there is more than one owner, then all of the shareholders will need to agree to the sale.

The assets and liabilities of the business are held by the limited company. When the shares of the limited company are sold, the assets and liabilities are transferred together with the company.

Check the pre-emption rights of existing shareholders

Pre-emption rights allow shareholders to purchase shares before they are offered to any third party, either as part of a new share offering or as part of a share transfer by an existing shareholder.

Shareholders pre-emption rights are detailed in the shareholders agreement and/or articles of association, so it is important to check that you are not in breach of these when selling a business in the UK. 

Capital gains tax

You may have made a ‘capital gain' when selling a UK business (for example, the money you get from the sale, or assets you keep from it).

Capital Gains Tax is a levy on the profit when you sell (or ‘dispose of') an asset that has appreciated in value. It's not the amount of money you receive that's taxed; it's the increase in profit.

If you owe Capital Gains Tax, you might be eligible to claim other benefits such as Entrepreneurs' Relief (or business asset disposal relief).

Selling your assets

Instead of selling the shares of a limited company, you could sell the assets of the business. The assets of your company, such as goodwill, equipment, furniture, fixtures, account receivable, inventory and investments could be sold to the new owner directly.

The assets of the company may be sold as a going concern. This is where you sell enough of the assets so that the business continues in its present form. The business then retains its customers, suppliers and employees. 

You will want to value your business by appraising each and every asset including goodwill. 

Selling part of your business

It’s important to keep staff in the loop if you are selling part of your business. For example you may be selling a particular department or function. 

If any of your employees are affected by the sale of part of your business, you must inform them about the adjustments, including: 

  • When and why part of the business is being sold?
  • If necessary, give details on redundancies or relocation packages.

Transferring liabilities

Your business is likely to have liabilities such as accounts payable, salaries, taxes and loans.

If the limited company is being sold, generally the liabilities of the business are transferred with the company to the new owner. The buyer will, of course, want to investigate the liabilities before buying the company.  

Companies house

Don't forget to update companies' house with the company's statutory registers of members, directors, and "people with significant control."

You must also submit a Company Tax Return to HMRC up to the point that the business is sold. If a profit was made during that time, or any profits accrued from the sale of business assets, Corporation Tax will be due. If your business is VAT-registered, the VAT registration may be transferred to the new owner.

Independent legal advice can help you to sell your business

You will want to weigh up which option is better - to sell the limited company or to sell assets of the business to a buyer.

Understanding the different sale options and getting your business ready to sell can be both confusing and time consuming. 

An expert can provide assistance on preparation, sale and transfer as well as evaluating the taxes you need to pay when selling your business. There may be significant tax advantages for a particular course of action.

Related Sales & Aquisitions Content

Deferred Consideration - Paying for a business in instalments
Exit Management Plan - How to maximise the sale potential of your business.

Credit check of your buyers

Don't forget to credit check your buyers. You don't just start the process of selling your company to anyone who claims that they can afford it. 

You need to validate the source of funds of the buyer and how long it takes to complete due diligence of your limited company. 

Although the value of your company matters, you also need to pay attention to the character of the buyer and the legal documents that have to be prepared to close the deal and complete the transaction. 

You also have to decide on how the payment will be made. Will you require a down-payment while the process of transfer is on-going? Or will the money be received in stages at and after completion? You can decide on that matter and have an agreement with the buyer.

Protecting the business

A non disclosure agreement can help protect you and the business you are selling. 

An NDA can be a valuable deterrent against future use of confidential information in instances where the sale of a UK business breaks down.

In a commercial sense, the fact that you are selling your company may be sensitive data, and using a non-disclosure agreement offers several major advantages, even when you believe the other party will keep confidentiality:

  • If your buyer is already in the same industry, they may use the information in your sales negotiations to improve their own business if they decide not to go any further.
  • If discussions break down at a later date and you wish to terminate the agreement, you may do so knowing that if the other party makes use of the supplied information, you have a legal claim against them.
  • If they used your confidential information for commercial gain, or in any fashion other than as specified in your NDA, you may be able to pursue legal action against them.

How long does it take to sell a business in the UK?

Luck, timing, keenness of the buyer (and more recently, global pandemics!) can all impact how long it takes to sell a business. 

The answer would depend on how well you prepare your business for sale and how patient you are when looking for buyers. 

On top of that, your business's revenue, assets, location, and cash flow play big roles in the process. 

Can I sell a part of my limited company?

Selling a portion of your limited company means you don't have to run it alone. Your responsibilities will be shared by the new buyer. 

However, you should settle how the company is going to be managed with the new shareholder. You need to come to an agreement, and perhaps to enter into a formal shareholders’ agreement, to avoid complications in the future.