Selling a business is one of the most significant financial decisions an owner will make. Working with experienced business sale solicitors in London can help you maximise profits, reduce legal risk and ensure a smooth transaction. Most owners sell only once, and the decisions taken in the months before a sale – how the business is prepared, how the deal is structured and what is agreed at heads of terms stage – often affect the final outcome as much as the headline price.
In this guide, our corporate and commercial solicitors explain the key legal and tax issues for owners selling a company or business in England and Wales, and how early advice can protect – and often increase – the value you receive.
Preparing Your Business for Sale
Before marketing your business, preparation is key. Buyers are attracted to businesses that are well-organised, transparent and legally robust. Solicitors often work alongside accountants and tax advisers to ensure the business is sale-ready.
Key steps include:
- Ensuring company records, statutory registers, contracts and compliance documents are up to date
- Reviewing ownership of assets, intellectual property and premises
- Checking key customer, supplier and finance contracts for change of control clauses
- Identifying and resolving potential legal issues early, for example through vendor due diligence
- Presenting clear financial information and forecasts
Early legal input helps avoid delays and renegotiations later in the process.
Heads of Terms: An Important Stage in Any Business Sale
Heads of Terms (HoTs) are a key stage in any business sale. Although usually non-binding, they establish the commercial framework of the deal and reduce the risk of misunderstandings.
Well-drafted Heads of Terms should clearly cover:
- What is being sold (shares or assets)
- Purchase price and payment structure
- Timetable and key conditions
- Exclusivity and confidentiality, which are usually legally binding
- Any post-completion obligations
Deals often collapse where key issues are overlooked at this stage. Solicitors help ensure that the HoTs protect your position while remaining attractive to buyers.
Due Diligence, Warranties and the Disclosure Letter
Once heads of terms are agreed, the buyer will carry out legal, financial and commercial due diligence. The findings shape the sale agreement and, in particular, the warranties and indemnities the seller is asked to give.
Warranties are contractual statements about the business. Sellers protect themselves principally through a carefully prepared disclosure letter, together with limitations on liability such as financial caps, time limits for claims and minimum claim thresholds. On larger transactions, warranty and indemnity (W&I) insurance can reduce the seller’s ongoing exposure and support a “clean exit”.
Getting this stage right is one of the most effective ways of protecting the price you have negotiated.
Share Sale or Asset Sale?
| Share sale | Asset sale | |
|---|---|---|
| What is sold | The shares in the company – the business changes hands with everything in it | Selected assets, such as goodwill, equipment, contracts, IP and premises |
| Who is the seller | The shareholders | The company |
| Liabilities | Buyer takes on all historic liabilities through the company | Buyer chooses which liabilities to take on |
| Employees | Employer does not change; TUPE does not usually apply | TUPE usually applies; employees transfer to the buyer automatically |
| Contracts and consents | Usually stay in place – check change of control clauses | Contracts, leases and licences must be transferred; consents are often needed |
| Tax for the seller | Usually a single charge to Capital Gains Tax; Business Asset Disposal Relief may reduce the rate to 18% | Corporation Tax on the company's gain, then further tax when the proceeds are extracted |
| Warranties | Extensive warranties and indemnities | Usually narrower |
| Usually preferred by | Sellers | Buyers |
Most SMEs operate through limited companies, meaning sellers must decide whether to sell shares or business assets.
Share Sale
- Buyer acquires the company with all assets and liabilities
- Usually more tax-efficient for individual sellers, who are generally taxed only once
- Buyers typically require extensive warranties and indemnities
- Employees, contracts and licences usually stay with the company, although change of control provisions must be checked
Asset Sale
- Buyer selects specific assets and liabilities
- Allows the buyer to leave behind historic liabilities
- May require third-party consents, such as landlord approval for lease transfers
- Sale proceeds are received by the company, which can lead to a “double tax charge” when they are extracted
Tax considerations often drive this decision, and early tax advice is advisable to avoid unnecessary tax exposure.
Tax Planning When Selling a Business and Business Asset Disposal Relief
On an asset sale, a major concern for sellers is the so-called “double tax charge”: Corporation Tax on the company’s gains, followed by income tax when shareholders extract the proceeds. On a share sale, individual sellers are usually taxed only once, under Capital Gains Tax (CGT).
Many sellers qualify for Business Asset Disposal Relief (BADR, formerly Entrepreneurs’ Relief). For disposals on or after 6 April 2026, BADR reduces the CGT rate on qualifying gains to 18% (up from 14% in 2025/26 and 10% before April 2025), compared with the higher CGT rate of 24%, subject to a lifetime limit of £1 million of qualifying gains. On a share sale, the seller must generally have been an officer or employee of a trading company and held at least 5% of its shares and voting rights for at least two years before the sale.
Because BADR rates have risen in stages, timing matters: for CGT purposes the disposal generally takes place when an unconditional contract is exchanged, not at completion.
We work closely with tax advisers to ensure transactions are structured correctly and reliefs are not lost.
Structuring the Sale Price to Maximise Value
While an immediate cash payment is often desirable, flexible pricing structures can increase overall value and attract more buyers.
Common options include:
- Deferred consideration paid over time
- Earn-out arrangements linked to future performance
- Seller consultancy or employment agreements post-sale
- Non-cash consideration, such as shares or loan notes in the buyer’s company
- Joint venture arrangements sharing future risk and reward
Each structure has legal and tax implications that must be carefully managed.
The price mechanism also matters. A “locked box” fixes the price by reference to historic accounts and gives the seller certainty, whereas completion accounts adjust the price after completion. Earn-outs and deferred payments need careful drafting and security, because after completion the buyer controls the business on which your payments depend.
Deciding Which Assets to Sell in a Business Sale
Only assets essential to the business need to be included in the sale. In some cases, excluding certain assets can increase overall returns.
Examples include:
- Retaining freehold or long leasehold property and leasing it to the buyer
- Excluding intellectual property and licensing it instead
- Separating distinct business activities prior to sale
Solicitors can help restructure businesses in advance to support these strategies.
Employees, TUPE and Workforce Changes in a Business Sale
Employee rights are protected under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).
TUPE mainly applies to asset sales. On a share sale the employer – the company – does not change, so TUPE does not usually apply, although the buyer still takes on all existing employment liabilities through the company.
On an asset sale:
- Employees assigned to the business transfer automatically to the buyer
- Their terms, conditions and continuity of employment are preserved
- Certain liabilities transfer with them
- Both seller and buyer must inform (and in some cases consult) affected employees, and the seller must provide employee liability information to the buyer at least 28 days before completion
Dismissals connected to the transfer are high-risk unless justified by an economic, technical or organisational (ETO) reason involving changes to the workforce. Even then, correct procedures must be followed to avoid unfair dismissal claims.
Restrictive Covenants and Protecting Business Goodwill
Buyers will usually require sellers to agree to restrictive covenants to protect the goodwill of the business.
These may restrict:
- Competing businesses
- Soliciting customers or suppliers
- Poaching staff
The courts generally treat covenants given by a seller on the sale of a business more favourably than those in employment contracts, but they must still be no wider than reasonably necessary to protect the goodwill being paid for. Solicitors ensure covenants are fair, proportionate and legally effective.
Why Instruct Specialist Business Sale Solicitors?
Selling a business involves complex legal, tax and commercial considerations. Specialist solicitors provide:
- Strategic advice from the outset
- Risk management throughout negotiations and due diligence
- Clear drafting of the sale agreement, warranties and disclosure letter
- Support through completion and post-sale obligations
Their involvement can help maximise value, reduce stress and deliver a successful exit. We also advise on business acquisitions, management buyouts and shareholder exits.
Selling a Business: Frequently Asked Questions
How long does it take to sell a business?
Once a buyer is found and heads of terms are signed, a straightforward sale often takes three to four months to complete, depending on due diligence, finance and any third-party consents.
Is it better to sell shares or assets?
Sellers usually prefer a share sale because it is often more tax-efficient and provides a cleaner exit. Buyers often prefer an asset sale to avoid historic liabilities. The right answer depends on the business and the tax position on both sides.
What tax will I pay when I sell my business?
Individuals selling shares usually pay Capital Gains Tax. If Business Asset Disposal Relief applies, the rate on up to £1 million of qualifying lifetime gains is 18% for disposals from 6 April 2026.
When should I instruct a solicitor?
Ideally before heads of terms are agreed. Early advice is when there is most scope to influence the structure, price mechanism and tax outcome.
Speak to Our London Business Sale Solicitors
From our offices in Mayfair, London and Woodford Green, Essex, our experienced corporate and commercial solicitors regularly advise business owners on the sale of SMEs across a wide range of sectors, including hospitality, retail, technology and professional services.
If you are considering selling your business and would like tailored legal advice, please contact Alan Zeffertt, Consultant Solicitor, on 020 7043 1621 or at azeffertt@thirskwinton.co.uk.
This article is for general information only and reflects the law at the date of publication. It is not legal advice and should not be relied on as such. For advice on your own circumstances please contact us.