David Hughes, Commercial solicitor
Your buyer needs to fall for the future prospects of the business that you have spent years nurturing, and they also need to show that commitment with enough cash so that you can retire.
Your team of ‘bridesmaids’ who will help you plan your company sale will include a commercial solicitor (someone like me), and also your company accountant. I have worked with Pinkham Blair several times in helping various of their clients sell their limited company. The ‘legal process’ is the last stage in the sale journey – i.e. the bit where solicitors get involved in the drafting the sale contracts. There are at least three key parts of the planning process that Pinkham Blair can help you with before it is time for your commercial solicitor to get involved.
1. Advising on the most tax efficient way to sell – shares vs assets
A ‘share sale’ is where you sell the shares in your limited company to a buyer. You transfer your shares to a buyer who then steps into your shoes as company owner. The company carries on as before, but with a new director/shareholder. An ‘asset sale’ is where you transfer all of the individual assets (including clients, employees and property) from your company to the buyer’s company. There is a wholesale transfer of your businesses assets from one entity to the other. A share sale and an asset sale are taxed differently. Pinkham Blair can help you understand the difference at the earliest stage and how it will effect the amount of the sale proceeds that you will get to keep.
2. Producing the financial records on which the buyer will base their offer
Before the buyer is prepared to make a firm offer they will want to see the numbers behind your business. I have seen the difference that it makes to a buyer’s offer when the accounts have been nourished by a knowledgeable accountant to produce the best version of your company.
3. Negotiating the sale price
Once the buyer has made their opening offer there will usually be room to negotiate. The payment structure is as important as the overall purchase price. You will be helped best by an accountant who has experience of different payment structures and can guide you on balancing an attractive overall price against the risk of accepting instalment or performance based payments and not getting paid.
I would recommend any company owner who is thinking of selling to speak to Pinkham Blair before they go searching for a buyer. Your solicitor can arrive fashionably late to the party but you will want your accountant to be there early helping you hang the bunting and show off the cake.
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