Miller Hendry warns against not seeking advice early doors when selling a business
Tayside based solicitors and estate agents, Miller Hendry, today (20 June 2019) warned about the dangers of not receiving the proper advice early doors when seeking to sell a privately-owned business.
The focus tends to be on a quick sale for shareholding directors of many privately-owned companies, before moving onto new ventures or retirement. However, many under-estimate the time involved in making a business market ready and do not seek advice on the different options before they start, or take advice on the route map to follow for a successful sale.
Financial or legal pitfalls may occur in the latter stages of a deal, causing it to fail if advisors are not called in at the start of the process. Ideally, an advisory team should be gathered right at the beginning, including a lawyer and an accountant specialising in company transactions, to guide the company on the preparation for sale, before any moves are made to seek out buyers.
Alistair Duncan, Partner and Head of the Commercial department at Miller Hendry, said: “The role of the advisory team in this preparatory stage is as important as any work they will undertake in finalising the deal. Taking your time to get it right and make the business market-ready means that timescales of 12 to 24 months for preparation are not uncommon.
“In putting together a detailed exit plan for a limited company, the first question you are likely to be asked is whether you are looking for a share sale or an asset sale, also known as a business sale. The answer may be influenced by personal, financial or legal reasons which can be explored with the specialists, but the final decision will determine the process to be followed and the resulting tax implications for both buyer and seller.”
A key factor in the decision making between these two routes is the tax position. This is complex and specific to each situation, but generally individual shareholders will be better off in a share sale, with a single tax charge on any capital gains arising, and which is likely to be reduced to 10% if entrepreneurs’ relief applies.
In an asset sale, there is a potential double tax charge, firstly on the company, with corporation tax on the profit made on the sale of assets, and then on the shareholders when they withdraw the sale proceeds from the company.
Alistair added: “At each stage, the most important thing is that all members of your advisory team are working with each other in a seamless way throughout the process, as well as directly with you. Where the ground shifts, as it inevitably will, it’s important they remain focused on the vision you have for the company sale, and work with you to achieve the best possible outcome in changing situations.”
For further information on this subject, please contact Alistair Duncan at Miller Hendry on 01382 200000 or email: firstname.lastname@example.org.
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