In short: In a share sale, the owners sell their shares and the buyer takes over the company as it stands, including its history and liabilities. In an asset sale, the company itself sells its business and assets, and the owners keep the company along with anything the buyer leaves behind. Sellers usually prefer a share sale because the gain is taxed once and the break is cleaner. Buyers often prefer an asset sale because they can choose what they take on and may get tax relief on what they buy. The structure changes the tax bill, the treatment of staff and contracts, and the risk each side carries, so it needs settling before heads of terms are signed.
For the owner of a limited company, how the sale is structured matters almost as much as the price. Two offers with the same headline figure can leave you with very different amounts once tax and liabilities are accounted for. This article explains the differences from both sides of the table. It sits within our complete guide to business exit planning, which covers the wider preparation. If you trade as a sole trader or partnership, there are no shares to sell, so a sale is always a sale of assets.
In a share sale, the transaction is between the company's shareholders and the buyer. The company itself does not change. It keeps its name, its contracts, its employees, its bank accounts and its history, and only its owners are different the next morning.
In an asset sale, the seller is the company. It sells some or all of what it owns, typically goodwill, equipment, stock, customer contracts and intellectual property, to the buyer, which is often a company of its own. The original company continues to exist, now holding the sale proceeds and whatever was not sold.
That single difference, who sells and what changes hands, drives almost everything else.
| Issue | Share sale | Asset sale |
|---|---|---|
| Who sells | The shareholders | The company |
| Historic liabilities | Stay with the company and pass to the buyer, subject to protections in the sale agreement | Generally stay with the seller's company unless the buyer agrees to take them |
| Employees | Stay employed by the same company | Usually transfer to the buyer under TUPE |
| Contracts and licences | Stay in place, subject to any change of control terms | Need to be transferred, often with the other party's consent |
| VAT | Not charged on a sale of shares | Normally charged unless the sale qualifies as a transfer of a going concern |
| Due diligence and warranties | Usually deeper, with more extensive protections for the buyer | Focused on the specific assets and liabilities transferring |
| What the seller is left with | Cash, with no company to deal with | A company holding the proceeds, which still has to be dealt with |
Tax is the main reason. When you sell shares, any gain is taxed once, in your hands as a shareholder, and reliefs such as Business Asset Disposal Relief may reduce it where the conditions are met. The money reaches you directly.
A share sale also gives a cleaner break. The company's history goes with it, so you are not left managing an empty company, collecting old debts or settling old liabilities after completion.
The trade off is exposure. Because the buyer inherits everything the company has ever done, it will investigate more thoroughly and ask for more extensive warranties and indemnities from you personally. Our guide to due diligence when selling a business explains what that investigation covers and how its findings can change the terms.
An asset purchase lets a buyer choose. It can take the trade, the customers and the equipment while leaving behind disputes, old tax positions and liabilities it does not want. For a buyer worried about what a company's history might contain, that is a strong attraction.
There can be tax advantages too. A buyer of assets may be able to claim tax relief on some of what it pays, such as capital allowances on plant and machinery and, in some circumstances, relief on goodwill and other intangible assets. A buyer of shares generally inherits the company's existing tax position instead.
These preferences rarely stay hidden. A buyer that wants assets may offer more for them than it would pay for the shares, or ask for a lower price to accept a share purchase. Understanding what each structure is genuinely worth to you, after tax, is the only way to compare offers that are framed differently.
An asset sale usually involves two separate layers of tax, which is why sellers are wary of it.
The company is the seller, so the company pays tax on any gains and profits arising from the sale. Goodwill, property, plant and stock are each treated differently, and the way the price is allocated between them in the sale agreement affects how much tax arises and when. Allocation is a negotiation in its own right, because the split that suits the seller is rarely the one that suits the buyer.
Once the company has sold its business, the proceeds are inside the company, not in your bank account. Extracting them creates a second tax event. Whether that happens through dividends or by closing the company, the route chosen, its timing and the anti avoidance rules that apply to it can change the overall bill considerably. Getting the order of these steps wrong can mean paying more tax than the deal ever needed to create.
If you are weighing up an approach and are not sure which structure it implies, our tax advisory team can model the outcome of each before you respond.
When a business transfers to a new employer, the TUPE regulations usually move its employees across automatically, with their existing terms and length of service intact. Both sides have obligations to provide information and, in some cases, to consult. In a share sale TUPE does not apply, because the employing company does not change, as GOV.UK guidance on business transfers and TUPE explains.
A sale of business assets is normally subject to VAT. Where the business is sold as a going concern and specific conditions are met, it is treated as neither a supply of goods nor services, so no VAT is charged. Those conditions are set out in HMRC's VAT Notice 700/9, and getting them wrong can leave one side with an unexpected VAT bill. A sale of shares falls outside VAT entirely.
Contracts with customers and suppliers belong to the company, so in an asset sale they have to be transferred to the buyer, which often needs the other party's agreement. Leases, licences, permits and registrations raise similar questions. Stamp taxes also differ: a buyer of shares pays stamp duty on the share transfer, while a buyer of assets may pay Stamp Duty Land Tax on any property included.
Often, yes. A common example is a business that owns its premises. A Darlington engineering company might want to sell its trade while the owners keep the building and rent it to the new owner. That can be achieved in several ways, including moving the property out of the company before a share sale, but each route carries its own tax consequences and conditions, and some need to be in place well before a sale to work as intended.
Other exit routes have their own typical structures. A management team usually buys shares through a new company funded partly by borrowing, as our guide to how management buyouts are funded explains, and an employee ownership trust acquires a controlling shareholding. In a share sale, the price is also normally adjusted for the cash, debt and working capital in the business at completion.
There is no default answer. It depends on what the business owns and owes, whether the whole business is being sold, the kind of buyer involved, whether property or a separate activity needs to be separated out, and which reliefs are available to you.
The timing matters as much as the choice. Heads of terms normally state whether the deal is a share or asset sale, and the structure is treated as settled from that point. Changing it later is possible but costly, and arrangements that need time to qualify for relief cannot be rushed into place once a buyer is waiting. If you are still deciding what your exit should look like, our guide on creating a business exit strategy is a useful starting point, and the Exit Readiness Scorecard shows where your business currently stands.
We help owners understand what each structure would actually leave them with, after tax, well before an offer arrives. That includes reviewing how the company is set up, identifying assets such as property that may be better held elsewhere, and assessing which reliefs are available and what it takes to protect them.
When a buyer does make an approach, we model the outcome of share and asset structures side by side, work through the allocation of price and the extraction of proceeds, and work alongside your solicitor on the terms. Our business valuation work gives you a defensible figure to negotiate from, and our exit planning service covers the wider preparation.
For the full picture of preparing to sell, read our exit planning guide, or speak to our team about how a sale of your business would best be structured.
In a share sale, the shareholders sell their shares and the buyer acquires the company itself, including its history and liabilities. In an asset sale, the company sells some or all of its business and assets to the buyer and stays with its existing shareholders, along with anything the buyer has chosen not to take.
For the owners of a limited company, a share sale is usually more tax efficient because the gain is taxed once, in the shareholders' hands. An asset sale can create a tax charge inside the company and a further charge when the proceeds are extracted. The outcome depends on the reliefs available and the specific assets involved.
Buying assets lets a buyer choose what it takes on and leave historic liabilities behind in the seller's company. It can also give the buyer tax relief on some of what it pays for. These advantages usually show up in negotiation, with buyers offering different terms depending on the structure.
Usually, yes. Where a business is transferred to a new owner, the TUPE regulations normally move its employees to the buyer on their existing terms. In a share sale TUPE does not apply, because the employing company stays the same and only its owners change.
A sale of shares is not subject to VAT. A sale of business assets normally is, unless it qualifies as a transfer of a going concern, in which case no VAT is charged. The conditions for that treatment are specific and should be checked before completion.
The company is left holding the sale proceeds and any assets or liabilities the buyer did not take. The shareholders then need to decide how to extract the money, often by closing the company, and that choice carries its own tax consequences and anti avoidance rules.