Do I Need a Solicitor to Sell a Business?

What is involved in selling a business?

There is a broad range of tasks to complete in even relatively straightforward business sales. That includes:

• Negotiating heads of terms - Agreeing on the main points of the deal before drawing up contracts 

• Choosing between a share sale or asset sale - Deciding what is included in the transaction and how it will be structured

• Drafting and agreeing a sale and purchase agreement (SPA) - Writing and finalising the legally binding sale contract

• Making legal warranties and disclosures - Confirming key facts about the business and identifying any known issues

• Transferring contracts, leases, IP and employees - Legally transferring key rights, agreements and employees to the buyer

• Handling regulatory and compliance issues - Making sure the sale meets all the relevant legal and industry requirements

• Managing completion and post-completion obligations - Finalising the sale and dealing with any after-sales duties

Within those broadly defined areas, there’s an awful lot that can go wrong. Even a minor oversight can have serious financial and legal consequences and jeopardise the years of hard work you have invested in the business. That’s why most sellers appoint a solicitor to manage the sale.

Working with an experienced solicitor provides clarity, protection and peace of mind that every legal requirement has been addressed, and that no unexpected issues will arise after completion. That certainty allows you to retire or move on to your next venture with confidence.

When might you consider selling a business without a solicitor?

As we’ve said, although it’s highly advisable, instructing a solicitor is not a legal requirement. In theory, you could avoid the costs of using a solicitor to sell a business by negotiating with the buyer directly and drafting the sale and purchase agreement yourself.  

That may be possible if the business is:

• Very small and uncomplicated

• Owned by a family member or close friend

• Being sold at a relatively low price

• Limited to a small number of basic assets, such as equipment and goodwill

• Free from property leases, complex contracts and employees

For example, you may be able to sell an owner-operated local service business, such as a window-cleaning or gardening company, without a solicitor. In this case, the only assets are likely to be one or more vehicles, some tools, the business name and customer goodwill.

In this scenario, the transaction should be relatively straightforward. You’ll have to negotiate the sale price and complete the transfer of the assets, business name and customer list before formalising the deal in a simple sale and purchase agreement.

What are the risks of selling a business without a solicitor? 

Trying to sell a business without legal support can be a costly gamble. Common pitfalls include:

• Signing contracts you don’t fully understand and leaving yourself exposed

• Overlooking or failing to disclose long-term liabilities

• Creating agreements that aren’t legally enforceable

• Breaching employment or regulatory laws

• Weakening your negotiating position

• Facing legal claims after completion

Even in seemingly simple sales, there are still risks. As an example, failing to disclose a debt or an outstanding legal judgment against the business could trigger a dispute. A solicitor can avoid that by providing protections such as warranties, indemnities and clear definitions of everything included in the sale. 

That’s why, even if you plan to avoid the costs of using a solicitor to sell a business, you should still ask a solicitor to review the documents before you sign them. That will ensure the deal is watertight and protect you from future claims.   

What is a solicitor’s role in the business sale process?

A solicitor does more than just prepare the paperwork. They guide you through the process, helping to manage risks and protect your interests. They also address all liabilities and ensure you clearly understand your rights and obligations. Their key responsibilities include: 

Structuring the sale

Your solicitor will advise you on whether a share sale or an asset sale is more appropriate based on the structure of the business. They will help you choose the right option to minimise tax, manage liabilities, protect your interests and maximise your return from the sale. 

Preparing the business

They will also ensure your business is as attractive as possible to prospective buyers from a legal standpoint. That includes reviewing leases, employee agreements and key contracts, and addressing any outstanding claims or disputes.  

Negotiating and drafting the heads of terms

They will negotiate the ‘heads of terms’ with the buyer to set out the main points of the proposed business sale before drafting the formal legal agreement. That includes: 

• The sale price and how the buyer will pay it

• What is being sold (shares, assets, business name, contracts, etc.)

• Conditions the parties must meet before completion

• Timelines for completing the sale

• Key responsibilities of the buyer and seller

• Any confidentiality or exclusivity arrangements

The intention is to outline the deal early to reduce the risk of wasted time and legal fees if the buyer and seller cannot agree on certain terms. 

Managing due diligence

Buyers will want to scrutinise your business carefully to understand its exact position. That includes everything from financial records and property arrangements to employee contracts and tax obligations. Your solicitor will assist with this process by:

• Preparing legally sound responses to the buyer’s enquiries

• Providing the necessary disclosures and managing sensitive information

• Avoiding any misrepresentation that could lead to future disputes

Handling employees, property and contracts

There can be complex legal requirements for selling a business in the UK. These sensitive issues are easy to get wrong without expert guidance and should be handled by a solicitor. That includes:

• Commercial leases

• Supplier and customer contracts

• Intellectual property

• The transfer of employees when the business is sold (known as TUPE)

Drafting the sale and purchase agreement

Once all the key terms of the deal are agreed, your solicitor will prepare a comprehensive sale and purchase agreement. This legally binding document formalises the deal and ensures that all aspects of the transaction are clearly set out, including what is being sold, the payment terms, warranties, indemnities and any protections for both parties. 

Completing the sale

Completing the sale is the final legal step in the process. Your solicitor will ensure the funds are transferred correctly, manage the legal transfer of assets, shares and property, and handle any regulatory filings.

What are the costs of using a solicitor to sell a business? 

If you run a simple, low-value firm, it’s understandable that the costs of using a solicitor to sell the business might tempt you to go it alone. For these smaller transactions, the solicitor is likely to charge a fixed fee. 

For a micro business up to £100,000 in value, you’ll typically pay a fixed fee of between £2,500 and £5,000. For a small business worth between £100,000 and £500,000, that fee usually rises to between £5,000 and £10,000.   

For higher-value deals, the solicitor’s fee is usually calculated as a percentage of the transaction at a rate of 1% to 2% of the sale price. However, hourly rates or a blended fee may apply in more complex transactions to reflect the additional workload and legal risk.

Regardless of the value of the business, you should always ask for a breakdown of the fees before you instruct the solicitor. That will enable you to weigh up the cost of legal support against the protection and certainty it provides.  

Sell your business with confidence

Selling a business can be complex, and even simple transactions carry risks. At Eddisons Business Sales, we help you navigate the process across a broad range of sectors. From professional valuations and preparing and marketing your business, to finding a buyer and negotiating the right deal, we help you sell with confidence and maximise your return.

Find out more about selling your business, including our business sales process, and get in touch for a free and confidential business appraisal.