There are two types of sale you can explore if you're thinking of selling your limited company. But what's the difference and which would work best for you?
Goodwill & Assets Sale
A goodwill & assets sale is essentially what it says on the tine. You're entering into a sale of your tangible and intangible assets. Say you're selling a catering company; your tangible assets would typically be your kitchen equipment, machinery, stock and the likes. Your intangible assets would be any existing contracts, your trading name and the ‘goodwill’ of the business.
A buyer making an offer on this type of sale will take into account:
- How much they think the goodwill is worth
- Which assets they are interested in purchasing
- How much they believe those assets are worth
Once the sale has completed, it will be your responsibility (as the old owner) to resolve any remaining assets and liabilities not transferred with the sale.
A goodwill and assets sale brings with it a level of flexibility. If there are any assets you don't want to sell on you'll be able to keep hold of them. Also, typically there would be fewer warranties and indemnities that you will need to provide when finalising your sale.
In most cases, when a goodwill and assets sale is agreed the liabilities of the business don't transfer across with the sale. You might also find you have to gain consent from certain third parties, such as a landlord if you lease your premises.
A share sale means your buyer is purchasing shares of your business. If they're purchasing 100% of the business's shares, then they will indirectly become the owner of everything the business owns, including the assets and any liabilities.
Typically, a share sale brings with it a higher guarantee that existing employees, clients and suppliers stay with the company. This is because any contracts in place will still be valid. You could see a better return with a share sale as you may be eligible to claim Entrepreneurs Relief.
As mentioned above, the business will retain all of its liabilities in a share sale. This could lead to your buyer requesting warranties, indemnities or even personal guarantee to offer protection. This could leave you exposed to personal liability – so be sure you seek legal guidance around these points to keep yourself covered.
Both types of sale have their benefits and negatives. The best sale for you will depend on your business and what you want to achieve by selling.
If you're thinking of selling your business, you can get started with our online valuation tool, or call our team on 0113 468 9280 to talk through your options.
Posted on June 04, 2020 | sell a business, questions, assets