Whether you are buying or selling a business, it is vital to seek legal advice as early as possible during the process to fully understand the type of agreement that you will need and to protect yourself from unexpected liabilities. Buying or selling businesses can be a complex process with many pitfalls for those who don’t have specialist legal knowledge. Every deal is unique, which means that there is no substitute for early legal advice to ensure certainty and to protect your investment or proceeds of your sale.
When selling a business it is vital to ensure that you have everything in order to protect yourself from potential claims from the buyer after the sale has completed. It is essential that the correct and thorough paper-trail is in place. You must have prepared your accounts, accreditations, licences and made sure that your books are up to date and complete. You must also ensure that you have filed accessible copies of your supplier, customer, employee and other contracts. This will all offer better protection from the buyer of your business. Failure to ensure these are completed can result in delays in the process and complicate the matter.
What are the vital steps to take when selling a business?
- Inform HMRC that you have sold your business.
- If you are VAT registered, you may be able to transfer your VAT registration number to the new owner.
- You must complete a self-assessment tax return, by the deadline, and include the date that you stopped trading on the return.
- If you have made a capital gain when selling your business, you will need to pay capital gains tax. You may be entitled to Entrepreneurs’ relied or other reliefs and reduce the amount.
- If anyone works for you, you must inform them of the sale and include the reason for sale and when you will be selling it. You must also include details of the redundancy terms or relocation packages that will be offered, if applicable.
- Your responsibilities will differ if you are selling a partnership or limited business. JMR Solicitors can advise you on your responsibilities and also guide you through the process of any type of business sale.
What business buying elements do you take care of?
When buying a business, you risk paying too much, as problems emerge long after completion. We reduce those risks, by identifying, quantifying and catering for them in the legal agreements. Otherwise the long-established rule of “buyer beware” applies and you have little recourse.
We focus mainly on private company transactions. We act for either the buyer of the entire business or the acquirers.
We use our corporate law, share valuation, intellectual property (IP), and tax expertise to put you in the best position. Our team of solicitors who specialise in dealing with buying businesses is small enough to be cost-effective and large enough to meet your deadlines for completion.
We also support minority shareholders buying a stake in a business. Our skill is managing the process of buying a business – often a daunting task without the right support and advice. We apply our knowledge to all transactions with a degree of proportionality ensuring that your legal costs are reasonable.
What are the steps in buying a business?
To achieve value for money there will be some steps to work through. Which steps are essential to you will depend upon the business you are buying. We work to streamline the process drawing on experience. Below we describe:
- Our track record for buyers of a business;
- Confidentiality and exclusivity;
- Heads of terms and the acquisition price;
- Due diligence when buying a business;
- The terms for buying a business;
- What to look out for if you are an investor buying a stake in the business;
- Reliance on warranties, and how warranties can affect the negotiations; and
- Dealing with the employees acquired upon buying a business.
- Buying a business: confidentiality and exclusivity
Our confidentiality agreements enable you to manage a variety of concerns, e.g. that the seller:
- Has no obligation to keep anything confidential.
- Could speak to other purchasers about your interests or plans for the business. This might be price sensitive information, market know-how, or trade secrets that you wish to bring to the target business.
- Could waste your time and money. An exclusivity agreement specifies a period during which the seller agrees to only discuss the sale or investment with you, which encourages the seller to commit to a deal. This is also known as a lock-out.