Selling Your Business: The Legal Process

In a share sale the buyer acquires the company itself, so its contracts, employees, and liabilities generally travel with it. In an asset sale the buyer selects specific assets and typically leaves liabilities behind.

Sellers often prefer share sales and buyers often prefer asset sales, for exactly that reason — and the tax consequences diverge significantly in both countries. This is a negotiated outcome, and it should be modelled by a lawyer and accountant together before you agree a price.

Due diligence examines financials, contracts, corporate records, employment terms, tax filings, litigation, and IP ownership. Anything a buyer discovers becomes a price reduction, an indemnity, or a reason to walk.

Common problems worth fixing in advance: IP registered to a founder rather than the company, missing signed contracts or expired leases, informal employee arrangements, incomplete minute books, and customer concentration you have never documented an answer for.

Deals typically move through a non-disclosure agreement, a letter of intent or term sheet (usually non-binding on price but often binding on exclusivity and confidentiality), then a definitive purchase agreement.

Do not treat the letter of intent as a formality. It sets the anchor for everything that follows, and exclusivity clauses restrict your ability to talk to other buyers while diligence runs.

Representations and warranties are statements about the business that can make you liable to the buyer afterward. Negotiate their scope, how long they survive, liability caps, and the size of any escrow or holdback.

Watch how much of the price is deferred. Earnouts tie payment to future performance you may no longer control — so the metric, its definition, and how the business will be run post-closing all matter. Expect to sign a non-compete and non-solicit, and negotiate its scope and duration.