Can I Sell My Small Business to Someone Else?

Introduction

Selling a small business can be one of the biggest decisions an owner makes. Whether you are retiring, moving on to a new venture, or simply want to cash in on the hard work you have put in, it is possible to sell your business to someone else.

However, selling a small business involves more than just finding a buyer. You will need to understand your business’s value, prepare the right paperwork, deal with tax implications, and ensure a smooth handover. This article explains how to sell your small business, what steps to take, and what to consider before completing the sale.

Can You Sell a Small Business?

Yes, you can sell your small business to another person, company, or investor. Most businesses can be sold as long as they have transferable assets such as customers, contracts, equipment, or intellectual property.

The sale can take different forms depending on how your business is structured:

• Sole trader: You sell the assets and goodwill of your business since there is no legal separation between you and the business.

• Partnership: All partners must agree to the sale, and the partnership assets are transferred to the buyer.

• Limited company: You can either sell the company’s shares or its assets.

The best approach depends on your circumstances, tax position, and what the buyer wants to purchase.

Step 1: Prepare Your Business for Sale

Before selling, make sure your business is attractive to potential buyers. This means putting your finances and operations in order.

Key preparation steps include:

• Organising financial records: Ensure your accounts, tax returns, and bookkeeping are accurate and up to date. Buyers will want to see at least three years of financial statements.

• Tidying up contracts: Review agreements with clients, suppliers, and employees to make sure they are transferable.

• Reducing reliance on you: Buyers prefer businesses that can run smoothly without the current owner.

• Fixing outstanding issues: Resolve any legal, tax, or regulatory problems before marketing the business.

A well-prepared business not only sells faster but often achieves a higher price.

Step 2: Value Your Business

The next step is to determine how much your business is worth. There are several methods of valuation, including:

• Asset-based valuation: Used when the business owns valuable assets such as machinery or property.

• Earnings-based valuation: Based on profitability, often using a multiple of net earnings or EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortisation).

• Market comparison: Comparing your business to similar ones that have recently sold.

An accountant or business valuer can help you assess the fair market value and set a realistic asking price.

Step 3: Find a Buyer

You can sell your business in several ways:

• Privately: Approach competitors, suppliers, or trusted contacts who may be interested.

• Through a business broker: A broker markets your business, finds buyers, and negotiates on your behalf (for a commission).

• Online platforms: Websites such as BusinessesForSale.com or Daltons Business allow you to list your business for potential buyers.

It may take time to find the right buyer, so start early and keep your operations running smoothly during the process.

Step 4: Negotiate the Sale

Once you find a potential buyer, the next step is to negotiate the terms of the sale. This typically includes:

• Purchase price: The agreed amount for the business or its assets.

• Payment terms: Whether payment is upfront, in instalments, or through an earn-out arrangement based on future performance.

• Assets included: Such as stock, equipment, property, or intellectual property.

• Handover period: How long you will assist the new owner after completion.

Your accountant and solicitor can help structure the deal to ensure it is fair and tax-efficient.

Step 5: Draft a Sale Agreement

The sale must be documented through a sale and purchase agreement, which sets out all the terms of the transaction. This legal document should include:

• Details of the buyer and seller.

• A list of assets being sold.

• The agreed price and payment schedule.

• Warranties and indemnities to protect both parties.

• Completion conditions and handover arrangements.

It is strongly recommended to work with a solicitor who specialises in business sales to ensure all legal aspects are covered.

Step 6: Handle Tax Implications

Selling your business has tax consequences, and these depend on how the sale is structured. The most common taxes include:

• Capital Gains Tax (CGT): Charged on the profit made from selling your business. You may qualify for Business Asset Disposal Relief, which reduces the CGT rate to 10% on gains up to £1 million.

• Corporation Tax: If you sell a limited company’s assets, the company pays Corporation Tax on the profit before distributing the remainder to shareholders.

• VAT: If your business is VAT-registered, you may need to account for VAT on the sale of certain assets unless the transfer qualifies as a “Transfer of a Going Concern” (TOGC).

An accountant can help you structure the sale in the most tax-efficient way and ensure all liabilities are paid correctly.

Step 7: Notify HMRC and Other Authorities

Once the sale is complete, you must inform the relevant authorities:

• HMRC: Let them know you have sold the business and cease trading. If you are self-employed, you will need to file a final Self Assessment tax return.

• Companies House: If you sold a limited company or dissolved it after selling assets.

• VAT Office: Cancel your VAT registration if you are no longer trading.

• Pensions and payroll: If you employed staff, close your PAYE scheme and settle final payments.

These steps ensure your old business records are closed properly and that you remain compliant with HMRC regulations.

Step 8: Plan for the Handover

A smooth transition benefits both you and the buyer. Depending on your agreement, you may stay involved for a few weeks or months to train staff, introduce key clients, or hand over systems.

Good communication during the handover helps protect the reputation and continuity of the business. It also builds trust between you and the buyer, reducing the risk of disputes later.

Example Scenario

Mark owns a small plumbing business and decides to retire. He works with his accountant to value the business at £80,000 based on annual profits. His accountant helps find a buyer, prepares the financial statements, and advises that the sale qualifies for Business Asset Disposal Relief.

After negotiating terms and signing the sale agreement, Mark pays a reduced CGT rate of 10% on the profit. His accountant helps him file his final Self Assessment, close his VAT account, and transfer his customer contracts to the new owner.

How an Accountant Can Help

An accountant plays a key role in selling your small business. They can:

• Prepare accurate financial statements for potential buyers.

• Value your business realistically.

• Structure the sale for maximum tax efficiency.

• Liaise with solicitors and buyers during negotiations.

• Manage HMRC notifications and final tax returns.

Having professional advice ensures the process runs smoothly, avoids legal or tax issues, and maximises the value you receive from the sale.

Conclusion

Yes, you can sell your small business to someone else, but it requires careful planning and professional guidance. From valuing your business and finding the right buyer to managing tax and legal matters, every step must be handled properly.

Working with an accountant and solicitor will make the process far less stressful and ensure you walk away with the best possible outcome. By preparing early and staying organised, you can sell your business confidently and start your next chapter on solid financial ground.