09/12/2009 by info.

Running a business via the legal structure of a Limited Company can be beneficial to a business owner on more than one level, however if you wish to sell a Limited Company it could become much more costly.

A business owner should be only interested in the net sale proceeds from the sale of their business. That is after the costs of the sale, agents fees, solicitors fees, and of course tax.
When you sell a business trading under the structure of a Limited Company there are two basic methods of structuring a sale of your company. Firstly as a share sale, or secondly as an asset deal.

In the first of these methods you just sell the shares, whereas in an asset deal the company sells the assets of the Limited Company to the purchaser.

In most cases a share sale would be preferred if you’re the seller as it will usually lead to the lowest tax charge. However, many purchasers prefer to acquire the assets of the company so you may therefore have to go down the asset route.

After April 2010 if you sell the assets of the company rather than the shares of the company, the tax changes could prove very costly.

The reason is that as from 6 April 2010 anyone earning over £150,000 per tax year will pay income tax at an effective tax rate of 36.1% on dividend receipts.

In addition the rate of corporation tax for small companies is supposed to increase to 22%.

When you take these two changes into account the tax charge for anyone looking to extract profits from a company via dividends could significantly increase.

So what can you do? Either:

· Sell your business before 6 April, however this even now is very a very short period of time.
· Offer your business for sale selling the share of your company not the assets
· When the business is sold, take out less than £150,000 a year from this company; this would only work if you didn’t need the full sale proceeds immediately.
· Become of non-resident and extract free of income tax, however you would of course need to live abroad.

By far the easiest of these is the sell the shares of the business not the assets

Posted in Selling Your Business, General | No Comments »

04/12/2009 by info.

One of the most frustrating aspects of any sale is perceived and unnecessary delay after solicitors have been instructed.

I am sure that many of you who have not sold a business but have been though the process in the sale of a residential property can recognise this feeling.

But if there is any fault whose it is?

There may be a number of reasons for a delay and the simplest one is that either a buyer or a seller is deliberately slowing down the sale process for personal reasons. Perhaps buyers are not ready to buy because they are waiting for a sale of their own to complete or the seller wishes to take advantage of seasonal profitability.

There may be issues that arise that neither party was aware about or one side wishes to try to hide and hoped that due diligence would not uncover the truth.

Sometimes the parties are at fault by instructing the wrong solicitor for the job. A solicitor without significant experience in business transfers can often stress and want answers to unimportant issues in the sale.

If a lease is being transferred the fault can lay with the landlord or landlords solicitor who have no incentive to hurry the process along. Often for them it is the better the devil you know.

Most of the time it is the fault of the buyer, seller or both for not managing their solicitor allowing them to sit on and not deal with paperwork when they receive it; the solicitor as a result with deal with matters when they have the time, so if you want a speedy conclusion you should be more proactive.

So is it ever the agent’s fault?

Well there are a good number of private sales where the seller and buyer conduct a good proportion of sales negotiations directly so an agent never gets involved in the process at all.

If an agent is involved they should provide comprehensive head terms for each sides solicitors and apply for references on behalf of the buyer, however when solicitors are instructed the agents job, that of finding a buyer, is technically over.

An agent may act as a go-between to communicate to both sides who is at fault in slowing the process down. But finding a buyer is what an agent is paid to do, not to try to hurry along professionals whom they have no power over.

Posted in Selling Your Business, Buyers, Business transfer agents, General | No Comments »