As a business owner, when the time comes, it’s important to plan the exit strategy for you and any other owners to ensure you do so in the most tax efficient way.

Many business owners will, at some point, look to sell the business rather than pass it on to their family. Selling the business is a complex process and it is helpful to gain some understanding of how the sale may take place.

What is the plan to sell the business?

Some businesses will have a natural cycle of events, and it may be that there are no suitable family members to continue with the business in family hands. Selling the business could take a number of years. Other businesses will have no formal plan, or timeline of events to work to, but may sell if a suitable offer is made.

There are many ways to sell a business. From a tax perspective, some of the questions we would look at include:

  • What is being sold? (e.g. company shares or an asset sale? The buyer may want to buy individual assets, but seller wants to sell the shares in the company);
  • What is the tax position for seller regarding deferred/contingent consideration and any "earn-outs" that may be paid?
  • What tax reliefs apply to the seller, and can we make better use of these?
  • Once the business is sold, what is the plan for the proceeds? The sale of a business can result in an immediate exposure to inheritance tax, and a plan may be required to help minimise these risks.

Is the business ready to be sold?

Selling a business is something that you would do only once or twice in your lifetime. The process is therefore unfamiliar to many and getting your business into shape for a sale is where our team can assist. For example, do you know who may be in a position to buy your business? What funding might they need (this may be external, or perhaps provided through shareholders loans in the form of deferred consideration). When might a sale be appropriate, and what events would trigger a disposal? What steps would you need to take to ensure that the business is sold for the best price (e.g. what might you do to ensure that profits or asset values are looking their best)?

There is a lot to consider, so our Transaction Taxes team can make sure you’ve covered all the bases and are getting the best result from the sales process.

Return to the main page of our Tax Planning Guide.

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