This is a very common and important question if you are thinking of buying or selling a business.
If you are buying a business, then its more tax beneficial if you buy the company assets and not the actual limited company for 2 main reasons. Firstly, if you buy the assets, you can claim capital allowances on the assets purchased and therefore reduce your tax. Secondly, if you buy assets, rather than the shares you will not have any liability for the debts of the business arising prior to your purchase to take over. These will still be the seller’s problem.
If you are considering selling a company it is generally better to sell the shares in the company for two main reasons. Firstly, all debts and past liabilities will go to the buyer leaving the seller completely free to move on. Secondly, a seller can claim Entrepreneurs’ relief and therefore pay only 10% of the capital gain.
The VAT registration limit for 14/15 is £81,000. If you see a business for sale that is already VAT registered, then you will have to register for VAT, UNLESS their turnover is under £81k and they have registered voluntarily.
Registration should take less than 10 working days and can be done on-line.
If you have started your own business and now wish to sell you can claim entrepreneur tax relief which will mean the capital gain will only be taxed at 10%.
One of the most common questions to ask when buying a business is do I have to keep existing staff? Well, most likely yes! If you take over an existing business, unless the previous owner makes the existing staff redundant by paying them their full entitlement, then you will have to take on the staff on their existing conditions.
Generally businesses for sale in Scotland can take up to 9 months to sell if the price is right. If you are planning on selling your business firstly you must get a realistic valuation and secondly be patient if you wish to obtain a reasonable price. Remember, although you may price realistically, a potential buyer is likely to have to approach a bank for funding. The buyer is likely to have to produce robust business plans based you your trading.
Make sure you have up to date accounts. No one will buy a business without seeing figures. Also make sure you are aware of lease commitments and whether you can sublease the property.
Setting up as a limited company has a number of benefits including limiting potential liability and reducing your potential tax liability. To get the most appropriate advice you should seek help from a chartered accountant.
