The Legal Checklist: What you Need to do Before Selling Your Business
Introduction
Selling a business is one of the most important decisions an owner can make. A carefully prepared legal checklist ensures the process runs smoothly, maximising the value of your business and reducing the risks of delays or deal failures. Proper preparation is essential for attracting buyers, expediting due diligence, and securing the best possible outcome.
1. Prepare Your Financial Records
Accurate and transparent financial records are the foundation of any business sale. Ensure your financial statements, including profit and loss accounts, balance sheets, and cash flow statements, are up-to-date and comply with UK accounting standards. It is also advisable to keep good management accounts as these can often provide a vital update to statutory reporting and can be very useful when calculating working capital requirements. Transparency builds trust with potential buyers, demonstrating the business’s health and future potential.
Read our article How to Sell Your Business for Maximum Profit in 2025 for insights on financial optimisation before a sale.
2. Review and Organise Legal Documents
Compiling and organising all essential legal documents is a critical step. The key documents include:
- Business formation papers, such as articles of incorporation, partnership agreements, or shareholder agreements. Note: if there has been any transfer of shares, including a share buy-back, it is advisable to seek an early legal review to confirm these will not cause any issues during a sale process.
- Verify that licenses and permits are current and transferable.
- Confirm that contracts with customers, suppliers, and employees are valid and up to date.
Organised documentation demonstrates professionalism and reduces buyer concerns.
3. Address Outstanding Legal Issues
Unresolved legal matters can deter potential buyers or reduce your business’s value. Take proactive steps to:
- Resolve any pending litigation or disputes.
- Address compliance issues related to industry regulations or local laws.
- Clear any regulatory fines or penalties.
A clean legal slate ensures a smoother due diligence process and builds buyer confidence.
4. Assess and Secure Intellectual Property Rights
Intellectual property (IP) can be a major value driver in the UK market. Ensure that all IP assets are:
- Properly registered with the appropriate UK or International authorities.
- Legally owned by the business, rather than by individual employees or contractors.
Clearly documented IP enhances both business valuation and buyer appeal.
5. Evaluate Employment Agreements and Obligations
Employees are a vital asset to any business, and their contracts must be properly organised. Key areas to review include:
- Employment contracts with key personnel.
- Non-disclosure agreements (NDAs) and non-compete clauses.
- Compliance with UK employment laws, including pensions and workplace regulations.
- Address potential liabilities, such as unpaid benefits or redundancy obligations, to avoid any surprises.
For further information on contracts with clients, suppliers and employees read our article – How to get your contracts in order before you sell a business
6. Examine Property Leases and Ownership
If your business operates from property owned by the business, it is worth getting early legal advice as it may be better to extract the property before going to market. If the property is leased, either from the shareholders or a third-party, make sure you have the following documents prepared:
- Review lease agreements to understand the terms related to the assignment or transfer of the lease.
- Clarify the ownership of the property and whether the lease is transferable.
- Address any outstanding repairs or obligations outlined in the leasehold agreements.
Property arrangements can impact buyer negotiations and affect the timeline of the sale.
7. Tax Considerations and Obligations
The tax implications of a business sale can be significant, it is essential to seek advice from a qualified tax advisor to ensure you have considered all options while remaining compliant. They can help you:
- Assess Capital Gains Tax (CGT) liabilities.
- Take full advantage of allowances, such as Business Asset Disposal Relief (formerly Entrepreneurs’ Relief).
- Plan for VAT implications and other tax considerations.
Proper tax planning can optimise the financial outcomes of the sale.
8. Engage Professional Advisors
Experienced advisors are invaluable in navigating the complexities of a business sale. It is wise to consider hiring the following experts:
- Legal advisors: To review contracts and ensure regulatory compliance.
- Wealth/Tax advisors: To guide you in structuring deal and managing the proceeds in the most efficient and beneficial manner.
- Business brokers / M&A consultants: To offer market insights and assist with finding buyers, deal structuring, valuation and negotiations.
Advisors bring expertise that ensures negotiations run smoothly and compliance is maintained.
For more guidance on selecting the right team, refer to our article – 3 reasons why you should engage a corporate finance company
9. Conduct a Pre-Sale Due Diligence
Proactive internal due diligence can identify and rectify potential issues before buyers conduct their own investigations. Key steps include:
- Auditing legal, financial, and operational aspects of the business.
- Identifying risks or inconsistencies.
- Taking corrective action to address any gaps.
Entrepreneurs Hub always arrange a legal review with our clients prior to going to market in order to minimise surprises, preserve deal value and prevent delays.
10. Plan for Post-Sale Transition
A smooth ownership transition is vital for maintaining business continuity. Develop a plan that includes:
- Knowledge transfer to new owners.
- Strategies for retaining key employees.
- Communication plans for customers and suppliers.
A well-planned transition reassures buyers and protects the business’s reputation.
For further transition planning tips read our article – What to Expect: The Complete Timeline for Selling Your Business
Conclusion
Selling your business is a complex process that requires careful preparation. By following this legal checklist, you can streamline the process, enhance buyer confidence, and achieve a successful sale. Seeking professional guidance from legal, financial, and business advisors is essential for maximising value while minimising risks. Start early, stay organised, and prioritise your readiness to achieve the best possible outcome.
If you would like to discuss your exit options, please contact us, call 08450 678 678 or email info@entrepreneurshub.co.uk
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FAQs – Selling your company
How do I sell my business?
At Entrepreneurs Hub, we talk about five key areas that make the difference between success and failure when selling your business. Read more…
How much can I sell my business for?
Determining your business’s value is more than just calculating a number it’s complex with key factors, that said the basic equation is actually quite simple. Read more…
How long does it take to sell my business?
The timeline varies depending on the complexity of the deal and how ready the business is for sale. On average, the process takes around twelve months – sometimes less, sometimes more.
While preparing your business for sale, Entrepreneurs Hub conducts in-depth research to identify potential acquirers. You’ll have the opportunity to review and approve this list before we make any approaches. Once the business is fully prepared – often the most time-consuming step, we begin marketing it. Typically, you’ll start seeing initial interest within a few months, with follow-up meetings happening shortly after.
As these meetings progress – coordinated and facilitated by Entrepreneurs Hub, you’ll begin receiving initial offers. At this stage, we’ll help you assess the strategic fit between your business and potential buyers. When you decide to move forward with an offer, an exclusivity period begins, during which the acquirer conducts Due Diligence (DD).
The DD phase typically lasts two to three months, depending on the complexity of your business. Once complete, the sale is finalised, and you’ve successfully sold your company.
How do I sell my business quickly?
Selling a business quickly is possible, but speed shouldn’t come at the expense of value or deal security Read more…
When is the best time to sell?
Selling your business is a major milestone, and the start of an exciting new chapter, whether that means new ventures or a well-earned retirement.
In our experience, the best time to sell is when you don’t need to – when your business is performing well – not necessarily tied to the calendar. That said, timing can still play a role.
Timing the Market
Strong economic conditions, sector growth, and buyer confidence boost valuations. Don’t wait for a “perfect” market – a well-prepared, well-performing business sells in any climate.
Plan Ahead (12–18 Months)
The best outcomes come from early planning: clean financials, solid forecasting and growth potential.
Spring & Autumn Are Active Periods
The M&A market is typically busier in spring and autumn while summer and winter tend to be slower due to holidays and year-end distractions. However, the unpredictability of deals and negotiations makes this hard to target. We do deals all throughout the year – the key is to work with someone who can keep driving the deal forward whenever it happens.
Financial Year- End
Selling your business well is a long process and aiming for your financial year-end milestone is a virtually impossible task. But it is worth bearing your financial year in mind as buyers will want to review the most up-to-date accounts available.
The best time to sell is when your business is ready, and you are too. With the right preparation and positioning the right timing follows naturally.
Can I sell my business online?
Yes, you absolutely can sell a business online. Many platforms specialise in connecting business sellers with buyers. Read more…