Preparing your business for sale

Preparing a business for sale means looking at it the way a buyer's solicitor will, finding the problems before the buyer does, and putting them right or at least being ready to explain them. Most of the work is in the company's records, its contracts, its intellectual property and its people, and much of it takes longer than owners expect. A seller who starts twelve to twenty-four months before going to market has time to fix things properly. A seller who starts when an offer arrives is usually negotiating over problems the buyer found first. This article explains what a buyer will look at, the issues we most often see in owner-managed businesses, and how to put them right.

Our earlier article on buying or selling a business sets out the stages of a sale from heads of terms to completion. This one looks only at the seller's preparation, and goes into more detail on the points that most often cost sellers time or money.

Why does preparation affect the price?

A buyer's view of a business is shaped as much by how it is presented as by the numbers. When a buyer's due diligence turns up a problem the seller had not mentioned, the buyer will usually ask for something in return. That may be a reduction in the price, a specific indemnity, part of the price held back in a retention, or a condition that delays completion. A serious problem found late can end the deal altogether. Just as damaging, the buyer starts to doubt the rest of the information it has been given, and asks more questions about everything else.

A problem the seller has found first is different. It can be fixed before the sale, or explained on the seller's terms and disclosed against the warranties in the disclosure letter, so that the buyer cannot later claim for it. The same issue that would have cost the seller an indemnity if the buyer had found it may cost nothing if the seller raises it at the outset.

When should a seller start preparing?

Ideally twelve to twenty-four months before the business goes to market. Some fixes are quick, such as filing a missing form at Companies House. Others take months, such as tracking down a former contractor to sign an assignment of intellectual property, renegotiating a key customer contract, or reducing the business's reliance on its owner. Some tax reliefs also depend on conditions being met for a period before the sale, so tax planning needs to start early too.

Preparation is also easier before a buyer is involved. Fixing a problem in private is straightforward. Fixing it during due diligence, with a buyer watching and a timetable running, puts the seller under pressure to agree to whatever the buyer proposes.

How does a seller find the problems first?

The most effective approach is to carry out a review of the business from a buyer's point of view before any buyer is approached. In practice that means working through the same questionnaire a buyer's solicitor would send, gathering the documents, and having a solicitor review them for anything a buyer would object to. On larger sales, particularly where several buyers will bid, the seller's advisers sometimes prepare a formal vendor due diligence report for buyers to rely on. For most owner-managed businesses, an internal review is enough.

The review has a second benefit. A buyer's questions will cover the same ground, so a seller that has already gathered the documents can respond quickly, which keeps the timetable moving and makes a good impression. The work also forms the basis of the disclosure letter later in the deal.

Can the seller prove who owns the company?

On a share sale, the first thing a buyer checks is that the seller owns the shares it is selling and that nobody else has a claim to them. In owner-managed companies this is where we most often find gaps, usually because shares were issued or transferred years ago without the paperwork being completed.

The share register and share history

The register of members should show every shareholder correctly, and every issue and transfer of shares should be backed by the right documents. That means board minutes and, where needed, shareholder resolutions approving each allotment, a return of allotment filed at Companies House, and a signed stock transfer form for each transfer, stamped by HMRC where stamp duty was payable. Any share buy-back the company has made needs particular care. If a company buys its own shares without following the procedure in Part 18 of the Companies Act 2006, section 658 of the Act provides that the purported purchase is void. The shares may then still belong to the person who thought they had sold them, and the register may be wrong.

Options, minority shareholders and the articles

A buyer will usually want all of the shares. Any share options, including EMI options granted to staff, need to be dealt with, and the seller should check what happens to them on a sale. If there are minority shareholders, such as a former co-founder or employees who hold shares, the seller needs to know whether they will support the sale. The articles of association or a shareholders' agreement may contain a drag-along right allowing the majority to require the minority to sell on the same terms, and pre-emption rights that may need to be waived. It is better to find out now than when a buyer has been chosen.

Companies House and the statutory registers

The company's statutory registers, including the register of people with significant control, should be up to date, and its filings at Companies House should match them. Every director and person with significant control should have verified their identity with Companies House. Verification became a legal requirement on 18 November 2025, and existing directors and people with significant control have been brought in over the following year, so by the time a sale is in view everyone should have done it. A company cannot file its confirmation statement until all its directors are verified. Any old charges that have been repaid should be shown as satisfied, so that the register does not suggest the company's assets are still subject to security.

Are the key contracts in writing and transferable?

A buyer is paying for the business's future income, so it will look closely at the contracts that produce it. Owner-managed businesses often run long-standing customer and supplier relationships on emails, purchase orders and terms that were never signed. That may work well in practice, but a buyer cannot assess what it cannot read. The seller should make sure the key customer and supplier contracts are written, signed and current, and that the company's standard terms are actually incorporated into its contracts rather than sitting on the website.

On a share sale, the contracts stay with the company, but some contain a change of control clause that allows the other party to terminate or renegotiate if the company changes hands. On an asset sale, the contracts have to be transferred to the buyer, which usually needs the other party's agreement. Either way, the seller should list the contracts that matter, check what each one says about a sale, and plan how to deal with the consents. Approaching a key customer too early risks the sale becoming known, so the timing of those conversations should be agreed with the buyer.

The seller should also look for terms a buyer will dislike, such as exclusivity, most-favoured-customer pricing, unlimited liability or long contracts at loss-making prices. Some can be renegotiated before the sale. Others simply need to be explained.

Does the company own its intellectual property?

For many businesses the brand, the website, the software and the designs are a large part of what the buyer is paying for, and ownership is often less clear than the seller assumes. Work created by an employee in the course of employment usually belongs to the employer under section 11 of the Copyright, Designs and Patents Act 1988. Work created by a freelancer, an agency or a founder who was not employed at the time belongs to its creator unless the rights have been assigned in writing, as section 90 of the same Act requires.

The seller should check that the company, not the owner personally, holds its registered trade marks and domain names, that every contractor who created something valuable has signed an assignment, and that software the business relies on is properly licensed. Our articles on who owns your code and on contractor agreements explain these points in more detail.

Are the employment arrangements in order?

A buyer will want to know who works in the business, on what terms, and whether the key people will stay. Every employee should have a written statement of the main terms of their employment, which section 1 of the Employment Rights Act 1996 requires from the first day. Senior staff should have contracts with reasonable restrictive covenants protecting customers and confidential information. Pension auto-enrolment, holiday pay and right to work checks should be in order, because each is easy for a buyer to test and expensive to put right.

People engaged as self-employed contractors deserve a close look. If in reality they work like employees, the company may face claims for employment rights and tax, and a buyer will price that risk. On an asset sale, employees assigned to the business will usually transfer to the buyer under TUPE, and the seller must give the buyer written information about them at least 28 days before the transfer, so the records need to be ready well in advance. Any employee information shared during the sale should be limited to what the buyer needs, in line with the company's data protection obligations.

What about premises, finance and personal guarantees?

Property

If the business occupies leased premises, the seller should check that the lease is in the company's name, find out whether the landlord's consent will be needed for the sale, and note the break dates and any repairing liabilities at the end of the term. On an asset sale the lease will usually need to be assigned, which can take time, so the landlord's requirements are worth understanding early. Our commercial leases series covers these points in detail.

Borrowing and security

Bank loans and other finance often have to be repaid or consented to on a sale, and any security over the company's assets will need to be released at completion. The seller should gather the finance documents and check what each requires.

Personal guarantees and arrangements with the owner

Owners of smaller companies have often given personal guarantees to the company's bank, landlord or suppliers. Those guarantees do not end automatically when the shares are sold. The seller should list them now, so that their release can be made part of the deal. The same applies to informal arrangements between the owner and the company, such as a director's loan account, premises the owner lets to the company without a written lease, or a car or phone contract in the owner's name. Each should be settled or documented on proper terms before the sale.

Are there disputes or compliance gaps?

A buyer will ask about any current, threatened or recent disputes, and about the company's compliance with the rules that apply to its sector. The seller should list any claims by or against the company, complaints from customers or staff, and correspondence with regulators. Data protection is a common gap in smaller businesses, so the company's privacy notices, records and contracts with data processors should be checked. Any licences or permits the business needs should be current and held by the company. Where a problem cannot be resolved before the sale, it is far better presented by the seller, with an explanation and an estimate of the exposure, than discovered by the buyer.

Could the business run without you?

In many owner-managed businesses, the owner holds the key relationships, signs every contract and knows how everything works. A buyer that sees the value leaving with the owner will either pay less, or pay part of the price later through an earn-out and ask the owner to stay on for a period. Reducing that dependence takes time, which is another reason to start early. Building a second tier of management, putting customer relationships in the hands of the team and writing down how the business operates all make it easier for a buyer to see a future without the seller.

What should be decided before going to market?

Some decisions are best made before any buyer is involved. The first is what is being sold, and how. A share sale usually gives the seller a cleaner exit, while an asset sale lets the buyer choose what it takes. If the company owns things the seller wants to keep, such as a property or a second business, they may need to be moved out before the sale, and dormant subsidiaries may be better closed. Each of these steps has tax consequences.

The seller should take tax advice early. Business Asset Disposal Relief can reduce capital gains tax on a qualifying sale to 18% for disposals from 6 April 2026, up to a lifetime limit of £1 million, but the conditions must be met for two years before the sale. An accountant should also confirm that the accounts are up to date and that the management accounts will stand up to a buyer's scrutiny.

Finally, before sharing anything with a prospective buyer, the seller should have a confidentiality agreement in place, and should decide which commercially sensitive information, such as customer pricing, will only be released at a later stage. This matters most when the buyer is a competitor.

Points to settle before going to market

For a typical owner-managed company, these are the points a seller should work through with its advisers before approaching buyers.

• the share register, share certificates and the paperwork for every issue, transfer and buy-back of shares
• any share options, minority shareholders, drag-along and pre-emption rights
• the statutory registers, Companies House filings and identity verification for every director and person with significant control
• written, signed contracts with key customers and suppliers, and any change of control or consent requirements
• ownership of trade marks, domain names, software and designs, with written assignments from contractors
• employment contracts, restrictive covenants, contractor arrangements and employee records
• the lease, the landlord's consent and any repairing liabilities
• bank finance and security, and personal guarantees given by the owner
• director's loan accounts and informal arrangements between the owner and the company
• disputes, complaints and compliance with data protection and sector rules
• the business's reliance on its owner
• the structure of the sale, any assets to be taken out first, and tax advice on reliefs
• a confidentiality agreement and a plan for releasing sensitive information

This article is general information on the law of England and Wales as at November 2026. It is not legal or tax advice on any particular transaction, and you should take advice on your own circumstances before preparing a business for sale.

Lawyerly's solicitors act for buyers and sellers of businesses, acting for one side only in any transaction, and carry out sale-readiness reviews for owners preparing to sell. You can read more on our selling a business page.