Buying or selling a business can be a major financial decision, whether you are taking over a small local company, selling a family-run business, acquiring a commercial premises, or transferring assets to a new owner. The legal process is not just about agreeing a price. You need to understand what is being sold, what liabilities are being transferred, what contracts are included, and what happens after completion.
This matters because the UK business market is large and active. At the start of 2025, there were an estimated 5.7 million private sector businesses in the UK, with SMEs accounting for 99.85% of the business population. If you are buying or selling, getting early legal advice from Athi Law firm can help you avoid unclear terms, hidden liabilities and costly delays.
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Understand Whether It Is an Asset Sale or a Share Sale
The first legal step is to understand the structure of the deal. In many business transactions, the sale is either an asset sale or a share sale.
In an asset sale, the buyer purchases selected assets from the business. These may include stock, equipment, goodwill, intellectual property, customer lists, vehicles, fixtures, contracts, or business premises. The buyer can often choose which assets and liabilities they want to take on, subject to negotiation and legal rules.
In a share sale, the buyer purchases the shares in the company that owns the business. The company continues to exist, but ownership of the company changes. This can mean the buyer takes on the company’s history, contracts, debts, tax position, employees and potential liabilities.
This distinction affects almost every part of the transaction, including due diligence, tax, employee rights, consents, warranties, indemnities and completion documents.
Agree the Heads of Terms
Before the full legal documents are prepared, the buyer and seller usually agree heads of terms. This document sets out the main commercial points, such as the purchase price, deposit, payment structure, assets included, completion date, exclusivity period and any conditions.
Heads of terms are often not fully legally binding, but some clauses can be binding, such as confidentiality, exclusivity and costs. You should be careful before signing because the document can shape the whole deal.
Key points to agree may include:
Carry Out Legal and Financial Due Diligence
Due diligence is one of the most important stages for a buyer. It allows you to check the business before you commit. For the seller, it is important to prepare accurate information and respond properly to enquiries.
Due diligence may cover:
For example, if you are buying a business for £250,000, but later discover a £40,000 supplier dispute or an expensive lease repair obligation, the deal may look very different. Due diligence helps you identify these risks before completion, not after.
Check the Business Premises
If the business operates from commercial premises, you need to check whether the property is owned, leased or occupied under another arrangement.
If the seller owns the premises and the buyer is purchasing it, commercial conveyancing will be needed. If the premises are leased, the buyer may need an assignment of the existing lease or a new lease from the landlord. Landlord consent may be required before the business can be transferred.
You should check:
A lease can create significant future costs. A buyer should understand whether they are taking on full repairing obligations, service charge liabilities, or restrictions that may affect how the business operates.
Review Employee Rights and TUPE
If employees are involved, you need to consider whether TUPE applies. TUPE stands for the Transfer of Undertakings (Protection of Employment) regulations. When a business changes owner, employees may be protected and may transfer to the buyer with their existing terms and conditions.
This can affect both buyers and sellers. The seller may need to provide employee liability information and consult employees where required. The buyer needs to understand wages, holiday entitlement, pensions, disputes, disciplinary issues, contracts and any historic employment liabilities.
Employee issues should be addressed early because they can affect the purchase price, timing and risk allocation in the sale agreement.
Prepare the Main Sale Agreement
The main sale agreement records the legal terms of the transaction. In an asset sale, this may be an asset purchase agreement. In a share sale, it may be a share purchase agreement.
The agreement should clearly state:
Warranties are promises or statements about the business. For example, the seller may warrant that the accounts are accurate, there are no undisclosed disputes, assets are owned by the business, and key contracts are valid. If a warranty is untrue, the buyer may have a claim.
Indemnities are more specific protections. For example, if there is a known tax issue, employee dispute or customer claim, the buyer may ask the seller to cover that particular liability.
Consider Tax and Professional Advice
Tax planning is a key part of buying or selling a business. You may need advice on Capital Gains Tax, Corporation Tax, VAT, Stamp Duty Land Tax, payroll taxes, stock valuation and how the purchase price is allocated.
For sellers, Business Asset Disposal Relief may be relevant where qualifying conditions are met. The rate is 18% on qualifying gains for disposals from 6 April 2026, and different rates applied for earlier periods. You should always take specialist tax advice because eligibility depends on your circumstances.
For buyers, tax can affect how the deal is structured. For example, the allocation of £200,000 between goodwill, fixtures, stock and property may have different tax consequences. Legal and accounting advice should work together before documents are finalised.
Deal With Consents and Third Parties
Many business sales require third-party consent. This can include consent from landlords, lenders, franchisors, suppliers, customers, regulators or licensing bodies.
You may need consent for:
If these consents are not obtained in time, completion may be delayed or the buyer may not receive everything they expected.
Prepare for Completion
Completion is when ownership changes hands. Before completion, both parties should check that all documents are agreed, funds are ready, consents are in place and practical handover arrangements are clear.
Completion may involve signing transfer documents, paying the purchase price, releasing security, handing over keys, transferring assets, updating Companies House records, notifying employees, and transferring website, domain, social media or software access.
A detailed completion checklist helps reduce the risk of missing important steps.
Plan the Handover After Completion
The legal work does not always end the moment completion takes place. The buyer may need a smooth handover from the seller, especially where goodwill, customer relationships, suppliers or specialist knowledge are important.
The seller may agree to provide support for a short period after completion. This could include introducing key customers, explaining systems, helping with supplier relationships, or assisting with staff transition.
Post-completion steps may include:
Get Legal Advice Before You Commit
Buying or selling a business can create major opportunities, but it can also expose you to financial and legal risk if the transaction is not properly structured. You need clear documents, proper due diligence, accurate disclosure and careful handling of employees, contracts, property and tax issues.
If you are planning to buy or sell a business, speak to a solicitor before signing heads of terms or agreeing final terms. Get in touch today to discuss your transaction and take the next legal step with confidence.
