Exit strategy – start thinking about it early

Plan Your Exit  

Your business may be owned by a limited company or some other entity which has a corporate identity which entitles it contract on its own behalf or it may be owned by you personally or in a partnership which has no legal identity. In the latter case the person or persons owning the business and wanting to sell must contract in their own names. In the case of individual owners there is no choice. Any sale will by definition be an asset sale.

A business owned by a limited company has two principal approaches to a sale

Limited Company Sales

To some extent your exit will depend on the rules adopted by the shareholders when you and your fellow shareholders set up the company.

If one shareholder wants to sell is he or she entitled to compel the others to do so?

Can those who do not want to sell prevent the others or any one of them from selling?

Such issues will be resolved quickly if the shareholders agreement or the articles address them and I have touched on this in an earlier article. In this Article I am assuming that the shareholders of a company or the individual partners are of one mind. The scope is, however much narrower for individual owners.

The sale a business owned by a company is achieved by a sale of the shares in the company. Technically the ownership of the assets does not change. They are still, after a sale, the property of the company. It is the shares in the company which change hands.

As a limited company you have two principal choices when you decide to sell. Do you sell the company or does the company sell its business and assets. These are known respectively as a corporate sale and an asset sale.

David Swede – Commercial Solicitor

This post raises more questions than it answers but these are the types of issues that should be considered with legal advice tailored for you.

If you are planning an exit from a business, it’s imperative to take advice as early as possible, usually to consider the issue even when you set up the business. I have decades of experience of advising on exit planning, so get in touch with me, I can save you a lot of stress and money at a later stage by getting it right in the beginning.

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