Selling your business – your responsibilities

Selling your business is a big step. You’ve poured your heart and soul into growing your company, but when the right offer comes along or you feel you have given it all you can give, you know it’s time to let go.

Sentimentalities aside, there are several responsibilities you need to make sure you’re fulfilling during the business sale process. You need to legally provide for staff you employ and you must also finalise your business’s tax affairs before you close the sale.

These specific responsibilities will change depending on which type of company you own. In this article, the Panthera Accounting team looks at the legal responsibilities you need to be aware of when you choose to sell your business.

I’m a self-employed sole trader. What are my responsibilities?

There are a few bases you need to cover before you can close the sale of your business. The most important one, from a legal point of view, is making any staff you employ aware of the impending change.

Staff should know when and why you’ve decided to sell the business, and are entitled to information regarding relocation packages, or even redundancy terms.

Tax-wise, you can use this form to tell HMRC you’ve sold your business. The National Insurance helpline is also open for you to cancel any Class 2 NICs, and you can transfer your VAT registration number to the new owner here.

If you made a Capital Gain when you sold your business, you’ll need to pay tax on it if the profit is above the annual threshold. If your business is eligible, there’s a possibility that you could reduce your Capital Gains Tax liabilities using Entrepreneurs’ Relief, or other relief schemes.

I’m in a Business Partnership. What are my responsibilities?

In this case, your responsibilities depend on whether you’re selling the entire partnership, or you’re simply disposing of your share. Your business’s partnership agreement may have conditions or restrictions relating to a sale so make sure you check it before going ahead with taking your company to market.

Just as with sole traders, as a business partner your staff must be informed about your reasons for selling the partnership, when it’s due to occur, and whether they’ll be relocated or made redundant.

In terms of tax and VAT obligations, make sure to observe the following points:

• You may need to transfer the VAT registration number to the new owner
• You need to fill out a personal Self-Assessment tax return by the deadline (if you’re only selling your share in the partnership)
• If you’re selling the whole partnership, the nominated partner must submit a Partnership Tax Return to HMRC by the deadline, and all individual partners must complete a personal Self-Assessment tax return.
• Capital Gains Tax will be payable on any gains you made during the sale of the partnership

Again, tax relief or exemptions may apply if you are eligible for Entrepreneurs’ Relief, or other types of reduced tax liabilities.

I’m the owner of a Limited Company. What are my responsibilities?

If you’re selling the entire shareholding, your responsibilities will be different compared to if the company is selling a part of its business.

If you’re selling the entire shareholding:

• Before you resign, you need to appoint new directors or company secretaries. Companies House must be informed of these changes.
• You’ll need to pay tax on any Capital Gains made from the sale. Relief may be available using the Entrepreneurs’ Relief scheme or an alternative.
• You must inform your finance provider know within 21 days of the sale if the finance you secured for the company was set against your personal property. Most times, however, you will be required to inform any providers of finance or credit to your firm prior to sale and the new owner will normally be required to pay all debts off in full.
• VAT registration numbers should be transferred to the new owner.

If your company is selling only part of the business, you must inform affected employees of any relevant changes. This may include redundancy packages, or relocation details.

How can I be sure I’m fulfilling all my responsibilities?

If you’re worried you’re forgetting something crucial, get in touch with us.

We can give you guidance on your responsibilities as a director when you decide to sell your business, and we’re more than happy to answer any questions you may have.

To find out more, please call 01235 768 561 or email enquiries@pantheraaccounting.com.