What Happens to Staff and Assets If I Sell My Small Business

Introduction

When you sell your business, the transaction involves transferring ownership of its assets and operations to a buyer. These assets can include property, equipment, contracts, intellectual property, and staff.

What happens to your employees and assets depends on how the sale is structured. There are two main ways to sell a business: a share sale or an asset sale. Each has different implications for staff, contracts, and ownership of company property.

Understanding these differences is crucial for a smooth transition and to ensure you comply with employment law and tax regulations.

Share sale vs asset sale

Share sale

If your business operates as a limited company and you sell your shares to the buyer, the company itself does not change — only the ownership of those shares.

In this case:

The company retains all its existing employees, contracts, and assets.

There is no need to transfer anything, as the company remains the same legal entity.

Staff continue their employment under the same terms and conditions.

For employees, it is business as usual. They may notice a change in management, but their contracts, pay, and benefits remain unchanged.

Asset sale

In an asset sale, you sell specific parts of the business — such as equipment, property, or customer contracts — rather than the entire company.

In this case:

The buyer purchases only the assets they want.

Employees and certain contracts may need to be transferred to the new owner.

The seller keeps any parts of the business not included in the sale.

Asset sales are more common for sole traders and partnerships, but limited companies sometimes use them too.

The main legal consideration in an asset sale is how staff are affected under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).

What happens to staff under TUPE

When a business or part of a business is sold, the TUPE regulations protect employees by automatically transferring them to the new employer. This ensures continuity of employment and preserves their rights.

Key points under TUPE:

Employees transfer to the buyer with their existing contracts intact.

Their length of service, pay, holidays, and other terms remain the same.

Both the seller and buyer must inform and consult affected employees before the transfer.

Dismissals connected to the transfer are generally unlawful unless there is a valid business reason.

For the seller, this means you cannot make staff redundant purely because of the sale. For the buyer, it means taking on all employees assigned to the part of the business being sold.

Example

If a plumbing business sells one branch to a new owner, the engineers and admin staff working in that branch automatically transfer to the buyer under TUPE with the same employment terms.

What happens to assets when selling a small business

Your business assets form part of what is being sold and may include:

Physical assets such as equipment, vehicles, or stock.

Property such as a lease or freehold premises.

Intangible assets such as goodwill, brand name, or intellectual property.

Financial assets such as customer lists or contracts.

How these are handled depends on whether you are selling shares or assets.

In a share sale

All assets remain owned by the company, and the buyer simply takes ownership of the company itself. There is no need to reassign assets such as leases or equipment unless contracts require consent for a change in ownership.

In an asset sale

Each asset must be transferred individually. For example:

Property leases may need the landlord’s consent.

Vehicle ownership must be updated with the DVLA.

Contracts with suppliers or customers may require novation or consent to transfer.

Your accountant or solicitor can help identify which assets require legal documentation or approvals before completion.

Handling outstanding debts and liabilities

In a share sale, the company keeps its existing liabilities, including debts, loans, and tax obligations. The buyer takes these on as part of the purchase.

In an asset sale, you may agree with the buyer which liabilities will transfer and which will remain with you. For example, you might retain responsibility for unpaid supplier invoices while the buyer takes on customer contracts.

It is essential to clarify these details in the sale agreement to avoid disputes later.

What happens to business property

If your business owns or leases premises, the property must be addressed in the sale.

Freehold property: Ownership is transferred through a property sale agreement, similar to selling a house.

Leased property: The lease may transfer to the buyer with the landlord’s consent, or you may terminate it and the buyer can negotiate a new lease.

Accountants and solicitors will handle property valuations and ensure any Stamp Duty Land Tax (SDLT) implications are calculated correctly.

Tax considerations when selling assets

Selling business assets can trigger tax liabilities, so it is important to plan carefully. Common taxes include:

Capital Gains Tax (CGT): Applies when you sell assets or shares at a profit.

Corporation Tax: Limited companies pay this on profits from asset sales.

VAT: May apply if selling assets such as equipment or property, unless the sale qualifies as a “transfer of a going concern” (TOGC), in which case VAT may not be charged.

An accountant can help you calculate tax liabilities and explore reliefs such as Business Asset Disposal Relief (BADR), which reduces CGT to 10 percent on qualifying business sales.

Example

A sole trader sells their business assets, including goodwill and tools, for £100,000. Their accountant helps claim Business Asset Disposal Relief, reducing the CGT bill from £20,000 to £10,000.

How to prepare your staff for the sale

Communication is key when selling your business. Staff should be informed early and reassured about what the sale means for their roles.

You should:

Explain whether their jobs will transfer under TUPE.

Provide written details of any changes to their employment.

Work with the buyer to ensure a smooth transition.

Clear communication maintains morale and reduces uncertainty, which helps keep the business running smoothly during the sale process.

The role of an accountant in selling your business

An accountant plays a vital role throughout the sale process by:

Valuing your business and assets accurately.

Preparing financial statements and forecasts for buyers.

Calculating tax liabilities and identifying reliefs.

Advising on whether a share or asset sale is more beneficial.

Ensuring the financial side of the sale is completed correctly and efficiently.

Their input ensures you achieve the best possible outcome while staying compliant with tax and employment laws.

Example scenario

Sarah owns a small design agency and decides to sell to a larger firm. Her accountant advises that a share sale is best to avoid complex asset transfers and TUPE negotiations. The buyer takes over all staff and assets, and Sarah benefits from Business Asset Disposal Relief on the gain from her shares. The process runs smoothly, and the staff continue working under the new ownership without disruption.

Conclusion

When you sell your small business, both staff and assets must be handled carefully to meet legal and financial requirements. Employees are usually protected under TUPE regulations, while assets are transferred either collectively in a share sale or individually in an asset sale.

With the right advice from an accountant and solicitor, you can structure the sale to minimise tax, comply with regulations, and ensure a smooth transition for everyone involved. By planning ahead, you protect your employees, your buyers, and the value of the business you have built.