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Buying a Business

Buying a business is a major investment. Once your offer is accepted, you move on to due diligence - an investigation period and your chance to ensure the deal you are being offered is as good as it seems. This is your only chance to review every aspect of the business before you commit to buying it.

There are many aspects to a business that all need to be considered and investigated – often a business comes with a property and other assets, there may be employees that need to be transferred under TUPE and there will certainly be goodwill to protect.

We understand that you will have your own particular concerns, when preparing or negotiating the contract documents, we look to tailor them as far as possible to suit your individual needs and protect your interests. To do this, we work closely with other professionals, such as accountants and surveyors, not only to make sure that you get the best advice, but also to see if we can find ways to add value to the transaction perhaps by restructuring the deal to improve your tax position

Should I buy the assets or shares?

If you are looking to buy a business and your seller is a sole trader or a partnership then your choice is narrowed to one – an asset sale. However, if they run the business through a limited company or a limited liability partnership, then your first decision is the choice about whether to purchase the assets of the company or the shares in the company. There are advantages and disadvantages to both options:-

Asset Sale Agreement

Advantages   

  • An asset purchase generally involves you in fewer risks and therefore the contract and transaction are more straightforward and less involved.
  • You will not have any liability for the debts of the business arising prior to your purchase to take over. These will still be the seller’s problem.

Disadvantages

  • You will be an entirely new owner of the business and therefore you will have to ensure that all the different parts of the business are legally transferred including any properties, employees or contracts.
  • The seller is a company and so, unless there is an express arrangement to the contrary, any warranties or guarantees they give are given by their company, not them personally. We would therefore be looking for personal guarantees.

Share Sale Agreement

Advantages       

  • You will step into your seller’s shoes as shareholder / director but the employees, contracts, properties etc will remain in the company’s ownership. There is therefore no need for the assets of the company to be transferred and this means a share sale can often be completed without any third party involvement making it far more discreet.
  • When you purchase shares, any warranties or guarantees given by your seller are (unless the sale is of a subsidiary company) given by them personally.

Disadvantages

  • At the end of the transaction you will inherit your seller’s company which means you will also inherit any problems (such as outstanding tax bills) that exist at the date of sale.
  • Because you inherit a company, a share purchase generally involves you in far greater risk than an asset purchase and therefore the contract and transaction are more involved and more warranties (including warranties relating to the payment of tax) will be necessary to protect you.

What our clients say

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Coronavirus:  We are pleased to announce we are Open for Business

Even during Leicester’s most recent, extended lockdown, you can be assured that it is ‘Business as Usual’ at Lawson-West and we're here to help you with your legal needs. 

We are driven by our commitment to help others. We are here. For you.

At this time, please contact us by telephone, website enquiry or email.
We’re here to help:

Leicester:
4 Dominus Way, Meridian Business Park, LE19 1RP           Tel: 0116 2121000

Wigston:
44 Long Street, Wigston, LE18 2AH                                              Tel: 0116 2121080

Market Harborough
Millers House, Roman Way,
Market Harborough, LE16 7PQ                                                        Tel: 01858 445480

Website:     www.lawson-west.co.uk

Email:           mail@lawson-west.co.uk

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