Selling the Business as opposed to the Company

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Published: 7 Feb 2017

Many companies reach a stage in their life, where the management needs reviving and the products are fast becoming obsolescent or expensive to service with new technology taking over.

Sometimes you just have to bite the bullet 

A decision needs to be taken as to whether to invest in the new technology and reap the rewards long-term or sell up now and take the short-term gain.

Neither way should be seen as a failure but the result of taking a realistic view of the present market for your products and services, financial resources and management abilities.

Selling the Business as opposed to the Company

If the shareholders wish to sell, they need to make the company attractive to buyers. This may require them to sell the Business as opposed to the Company.

In this situation:

  1. A business can be sold without many strings attached, whereas a company may have a few skeletons in the cupboard to declare to the buyer. 
  2. There may be additional taxation and costs in liquidating the company after the business is sold as opposed to selling the company.
  3. In selling the business, the valuation may be higher where head office or establishment/ fixed costs do not need to be taken into account.
  4. The sale of a business (as opposed to a company) makes the seller liable for termination of employment by the buyer, unless it is agreed in the sale agreement.

These are just a few considerations that need to be taken into account in selling a business rather than a company.

For a complete review please contact David Cane of Sundial Tax & Finance Ltd on 0330 122 8450.