Selling Your Business: Why There's No "One Size Fits All" Approach

When a business owner finally decides it's time to sell, the first instinct is often to think of it as a single, straightforward event. In reality, "selling a business" can mean two quite different things in law, and choosing the ill-suited route can leave you exposed for years after the deal has closed.

Two Very Different Ways to Sell

Imagine two shopkeepers, both ready to retire.

The first, who we'll call Margaret, owns a family bakery run through a limited company. She decides to sell her shares in the company to a buyer. The company itself carries on exactly as before, same name, same contracts, same staff, same bank account. Margaret simply hands over the keys to the company as a whole, including anything good or bad buried within it.

The second, David, runs a small engineering firm and instead sells the assets of his business, the machinery, the premises, the customer list, and the goodwill, to a buyer who sets up a new company to run it going forward. David's original company still exists afterwards, but it's now an empty shell, and it is David's company, not the buyer, that remains legally responsible for old debts and liabilities.

Same objective, same high street, yet two different solutions from a sale perspective.

Why It Matters

The consequences of that choice ripple through the whole transaction:

Margaret's buyer will want to dig deep into the company's history before agreeing a price, because they are inheriting everything, including any skeletons in the cupboard, such as an old tax dispute or a disgruntled former supplier. Margaret will be asked to give wide-ranging promises (known as warranties) about the state of her company.

David's buyer, by contrast, can pick and choose which assets and liabilities they wish to take on. If David's company once had a messy contract dispute, the buyer can simply leave that contract behind; which is favourable from the buyer’s perspective. What’s more complicated, is that David may need consent from the landlord of any premises to transfer the lease.

Tax treatment differs too. Margaret, selling shares personally, may benefit from valuable capital gains reliefs. David's company will pay corporation tax on the sale of assets, and a further layer of tax on capital gains may apply when he eventually extracts the proceeds from the company into his own name.

The Real-World Lesson

Neither route is inherently "better." A buyer may simply refuse to buy shares if they're nervous about hidden liabilities. Equally, a seller with valuable, hard-to-transfer contracts may find that an asset sale creates more headaches than it solves.

We've seen deals stall for weeks because the parties hadn't agreed early on which structure they were pursuing, only to discover, part-way through negotiations, that their assumptions about tax, staff, or liability were entirely different.

Our Approach

At Nowell Meller, we believe the right structure is a business decision as much as a legal one. Before any documents are drafted, we take the time to understand your priorities, whether that's a clean break, tax efficiency, or simply getting the deal done quickly, and recommend an approach that genuinely fits your circumstances.

If you're considering selling your business, or buying one, we'd be glad to talk through your options. Every business, and every exit, is different, and yours deserves advice built around it, not a template.

Get in touch with our corporate and commercial team to discuss your business sale or purchase.

Stafford 01785 252377
Newcastle 01782 987551
Alsager 01270 446260

Written by: Adam Basinski