The Responsibilities That Come with Selling a Limited Company

selling limited company

Selling a company after taking years to build it into something that will attract buyers is often bitter-sweet. Company owners can have a hard time letting go yet, at the same time, the benefits of selling may outweigh the benefits of keeping the business. Thus, selling a company is not always the easiest decision.

Once the decision has been made, there is a well-defined process we follow to bring the sale to fruition. Along with that process there are responsibilities that the business owner has to meet. To say that selling a limited company is not as easy as signing a few documents and turning over the keys is an understatement.

The first thing to determine is how much of the company is going to be sold. Is the owner selling his or her entire shareholding, or is just a portion of the business being sold? From that decision flow the rest of the business owner’s responsibilities. Assuming a company will be sold in its entirety, the business owner has to consider:

Appointing New Company Directors

New company directors should be in place before the company owner resigns as director. Why is this necessary? Because a limited company has to have at least one director to operate legally. Resigning before new directors are in place creates a whole lot of legal problems.

In addition, Companies House has to be informed about the change in directors. The business owner can easily take care of that online.

Capital Gains Taxes

A business owner selling a limited company has to take into account any capital gains realised from the sale. Such gains include not only cash from the sale transaction but they also include any material assets the business owner will be keeping post-sale. Business owners would do well to work with experienced accountants capable of helping them keep capital gains tax liabilities to a minimum.

Company Charges

Any charges against the company that involve the business owner's personal assets have to be addressed. For example, a small business owner who used a second mortgage on his home to finance the business needs to report the sale to the lender within 21 days of the transaction.

VAT Registration

A limited company is typically assigned a VAT registration number at such time as that company is responsible to pay VAT. In such cases, it's necessary to transfer the registration number to the new business owner. Otherwise, the previous owner could be in legal jeopardy should the company fail in its VAT obligations. Just like dealing with Companies House, VAT registration numbers can be transferred online.

Selling a limited company is not terribly complex if you have a basic understanding of owner responsibilities. Without that understanding though, selling a company could be problematic. Don't hesitate to get in contact with me if you're considering selling. My knowledge and experience will help you make the most of the sale while ensuring that you meet all your legal responsibilities.

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Author: Tim Luscombe

Hello, I'm Tim and I'm a specialist in corporate finance for the owner managed business. If you've been approached to sell your business, or you are thinking of buying a business or you just want to know what your business ...


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