Buying a Business

Depending on the type of purchase, there are different factors to be aware of

If you are thinking about buying a business, then there are two main options – you can buy the shares of a limited company or you can buy the assets from a limited company or sole trader/partnership.

There are different factors to be aware of, depending on the type of purchase:

If shares in a company are purchased, all the company’s assets, liabilities and obligations are acquired (even those that a prospective buyer may not be aware of);

When only the assets are purchased, then only the assets (and liabilities) which the buyer agrees to purchase – and which are identified in the sale agreement – are acquired.

An asset purchase is often more complicated than a share purchase because each of the separate assets which form the business needs to be transferred. It is necessary to obtain approvals of any third parties who may have an interest in a particular asset.

On the other hand, a share purchase is often the subject of longer documents because as a buyer you will want protections built in to cover against any hidden liabilities within the company.

There is a greater amount of flexibility in an asset purchase and a buyer will often choose this option to enable the opportunity to select the assets they wish to acquire, rather than simply buying a company, warts and all.

With a share purchase a buyer will acquire the whole company, continuing under their new ownership with all the contracts in place (including employment contracts).