Selling My Business; What Are My Responsibilities?

Selling a business is often a stressful period including retirement, administrative procedures and sometimes fresh capital to invest. Most of the sellers are surprised by how difficult it can be to sell their business for a good price in a reasonable timeframe. In order for your company to look attractive to a buyer, you need to show multiple sources of income, a healthy customer base, and a solid management team in place. Every buyer looks at how well branded the business is and if it has any intellectual property in place. Buyers will also look to see if the business has any existing contracts in place that are transferrable, and to make sure that the business has employees and a management team already in place so that there is no delay or disruption to the business following the purchase.

Selling a business requires precautions that may differ depending on whether it is a sole trader, a business partnership or a limited company.

Sole Traders

If you are a sole trader, you must tell your employees that you are selling the business and inform them about the redundancy procedure. You must send a Self Assessment tax return by the deadline. You’ll need to put the date you stopped trading on the return. If you’re registered for VAT, you may be able to transfer the VAT registration number to the new owner. If you have made a Capital Gain when selling your business you will have to pay Capital Gains Tax. However you can reduce the amount by claiming Entrepreneurs’ Relief.

Business Partnership

If you are a business partnership, your responsibilities will differ whether you are selling the whole business or just the assets. Be sure that there are no restrictions or conditions on the sale of the partnership in the Partnership Agreement. Your obligations towards the employees and regarding the transfer of VAT number and the Capital Gains are the same as for the sale of a sole trader. If you’re selling your share in the partnership, you must fill out a personal Self Assessment tax return by the deadline. However if you’re selling the whole partnership, you must send both a Partnership Tax Return and a Self Assessment tax return by the deadline.

Business equipment can be sold separately and have to be classed as assets. You have to make sure that the potential purchasers know that you are selling the business assets and not the business itself.

Limited Company

Finally if you are a limited company, your obligations will change, depending on whether you are selling the entire shareholding in your limited company or if the company is selling part(s) of its business.

If you are selling the entire shareholding, you will need to appoint a new director before you resign yourself (this is often the buyer). Moreover, you may need to pay Capital Gains Tax on profit you make from the sale of the company or on the value of the assets you sell from the company but you can reduce this by claiming Entrepreneurs’ Relief. If there are charges against your company (e.g. secured finance for the company against your personal property), you must let the provider know within 21 days of the sale. Finally if your company is registered for VAT, you can transfer the VAT number to the new owner.

If your company sells part of the business you must tell the reasons and the details about the redundancy procedure to your employees if they are affected by the sale.

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Finally, it is important to remember that you are the expert in running your business and selling it is not your expertise. Don’t be afraid to hire a business broker to facilitate in the sale of your business. Even taking the broker’s fees into account, they can help add at least 10% to the sale price. This could be a precious aid at this lively period.

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