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Often the biggest decision that a business owner has to make is deciding on whether to sell their business. There are many factors an entrepreneur will consider when deciding whether to sell their business, this article examines five of the key considerations:

1.      Share or Asset Sale

Generally, a share sale favours the seller as this typically involves the seller selling all the shares in the company to a buyer. This means both the assets and liabilities, including unknown liabilities, pass to the buyer. In an asset sale the buyer carves out and only purchases the assets it requires. The other assets (and often liabilities) are left in the company which remains owned by you the seller.

2.      Protect confidentiality from the outset

You should have in place a comprehensive non-compete and confidentiality agreement. A buyer is going to look into all aspects of your business as part of the sales process and it is not uncommon for a buyer to ask to see material contracts with your customers.

A carefully drafted agreement should prevent the prospective buyer from using confidential information learnt from due diligence to target your customers and damage your business.

3.      Be prepared for due diligence & do your own due diligence on the buyer

Any buyer is going to want to look at the inner workings of the business. The process of obtaining and reviewing this information is called due diligence. This usually forms two parts, legal and financial. Any business owner looking to sell their business should start preparing for due diligence early. Employing a solicitor experienced in corporate sales early will reduce the pain involved in the process. They will also flag up issues that the buyer will so you can resolve them or have your responses ready.

You should ensure that all contracts are kept in good order, including all employment contracts, leases, customer contracts and supplier contracts.

It is important that you do your own due diligence on the buyer. Can they afford to buy you out? What is their creditability and reputation? This is key if you are going to work for the business after the sale or if the business is being bought out in stages.

4.      Have the right advisors

It is important that you have experienced and trusted advisors involved from the outset to maximise the amount you receive and the success of the transaction. An accountant, financial advisor and tax advisor will be able to help you with the valuation, tax planning & due diligence. A lawyer will advise you on the sales agreements, due diligence and disclosure. Additionally, leverage the experience of your non-executive directors or advisory board that you may have in place.

When selling your business there are likely to be numerous lengthy legal documents required. These include:

  • Confidentiality Agreement
  • Share Purchase Agreement or Asset Purchase Agreement
  • Disclosure Letter

5.      Expect warranties and restrictions but limit your liability

Regardless of how the deal is structured, a seller can expect to give a series of promises regarding the business and how it has been run; these are called warranties. It is important that you carefully review these warranties to ensure that these are factual. These survive after the sale.

As part of the sale a seller can also expect restrictions on competing with the business. It is important that the asking price properly reflects the restrictions and the likelihood you may be unable to work for some period of time.

It is important that you seek to limit your liability as much as possible. Often a seller will want their liability capped, as a maximum, at the purchase price. Unless the liability is capped you might find yourself having to pay back the purchaser more than what you are paid for the business.


The sales process is not a quick process. It often takes months if not longer to finalise the sale.  It is important that you do not lose focus on the business and be prepared for the above.

A City Law Firm Logo (Image credit : A City Law firmIn the meantime, if you can’t wait, you can contact us directly for impartial advice by visiting our website or emailing [email protected]

Karen Holden is the Managing Director & Founder of A City Law Firm who practise both commercial law and litigation, having been admitted to the roll in 2005. If you require further advice or assistance, please do not hesitate to contact [email protected]

A City Law Firm Limited is a leading entrepreneurial law firm in the city of London, with a dynamic and diverse team of lawyers. It was awarded most innovative law firm, London 2016 and Business Law firm 2017. They specialise in start-up business law, the tech industry, IP and investment

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Karen Holden
Karen is the founder of A City Law Firm having been admitted to the roll in 2005. Having obtained her degree in Law, Karen went on to achieve a Masters from the University of Cambridge and her LPC from the College of Law. Her studies were conducted whilst working full-time as a senior member of management in the public sector. She is an entrepreneur having developed a thriving corporate firm from scratch and securing its place firmly in the City, She established the firm to provide experienced and dynamic solicitors in the City of London, who could think outside the box, whilst delivering at competitive costs. Karen oversees our high-net worth clients, entrepreneurs and technology companies. She handles complex disputes including High Court cases. She also creates structures for businesses and individuals seeking to secure investment either through equity share, EIS or corporate bonds and debt financing, by making them legally investment ready and through regulated tax advisors commercially aware of the types of structures available. Often talks at specialist events and universities where we have a solid partnership.


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