Company formation for small and medium enterprises
We understand that setting up a business in the UK can be a daunting process. We can make the start of your journey as easy as possible by assisting you throughout the company formation process.
Let us handle the following:
- Advise on the correct structure for setting up your UK company
- Company formation
- Registering for VAT
- Registering as an employer (PAYE scheme set-up)
- General advice on record-keeping and statutory obligations
- Being the company's registered office
- Acting as the Company Secretary
- The directors of a limited company must file certain documents every year, including ltd company annual accounts and an annual tax return.
- It is the director’s duty (if no company secretary is appointed) to inform Companies House about any changes, for instance when a director resigns or is appointed or if the company’s registered office is changed.
We offer specialist, personalised, end-to-end accounting and tax advice
Selling a business
Before putting your business up for sale, you should give careful consideration to your reasons for doing so. You will probably be asked about your reasons for selling a business by potential buyers, who will need to be comfortable with your motivation.
Selling a business, whether in part or wholly, may be the best way to achieve your objectives. You might, for instance, want to sell your business outright, leaving you with no financial or management involvement.
However, there may be a range of other exit routes which better suit your needs. If, for example, you want to retire but already have enough money, you could pass the business on to your children. Alternately, you could look into selling a business to your employees.
How to sell a business
There are various ways that could see you selling a business. The options available depend on factors like the type of business, size and sector. Most businesses are sold in a trade sale to another business - usually to one operating in the same or a related field.
1. Partial or full sale
You may want to sell the entire business or keep a small stake in it. The buyer may prefer that you retain partial ownership and continue your involvement. This can give the business continuity and the buyer confidence that the business will do well.
2. Sale of assets
Sometimes one specific part of the business is the most valuable part and all that a buyer is interested in. This might be the sale of physical assets, the sale of a ‘client book’ or the sale of Intellectual Property. Once sold, the remaining part of the business might be wound up or used for another business venture.
3. Immediate or phased payment
You can ask for payment in full when the sale is completed, or you can accept payment in instalments. The buyer may well prefer to pay in instalments, but you will be at risk, for example, if the buyer cannot make future payments.
Some buyers will want to make a series of payments based on profits, in which case you may be contracted to stay with the business for a period of time. This is often known as an 'earn out'.
Other options available to you could include:
- Finding a private-equity buyer
- A management or employee buyout. Perhaps with the help of a venture capital firm or bank loan
- Attracting a private investor
Is a sale realistic?
You can only sell your business if someone is prepared to pay for it. If you can't identify strong, substantive reasons why your business would make a good acquisition, it's likely to be difficult to find a buyer.
It usually pays to start planning a sale well in advance. This gives you time to groom the business and learn how to sell a business professionally and swiftly, fixing any issues which could dramatically affect its value and making it as attractive as possible to potential buyers.
When to sell your business
Selling a business at the right time can have a significant impact on the price you get for it. It's also wise to keep your plans confidential until the sale is imminent. This will prevent a negative reaction from customers and suppliers and eliminate unnecessary worry for your employees.
The state of your business is a more important factor. Aim to sell when profits are increasing and look likely to grow further. Consider the impact of sales cycles or seasonal fluctuations in your business - you might have fuller order books at a particular time of year.
Show strong financial performance
Planning well ahead will help you to ensure that your business has a financial record that attracts buyers. The first step is to ensure that your finances are in good order. This should always be the case, but planning to sell your business can put a spotlight on this area.
You will want to present your accounts as attractively as possible, as buyers usually prefer businesses that show increasing profits year on year. If possible, keep your financial performance reasonably stable throughout the year. Good realistic sales forecasts that are supported by evidence, will help to increase prospective buyers' confidence in your business. A full order book is always a good sign.
To maximise short-term profits, you can reduce longer-term investment. You might want to avoid expenses like advertising heavily or taking on new staff but avoid excessive cost-cutting. You need to maintain spending in essential areas, otherwise, the business could suffer and drive the price down.
Need help with selling your business? We are here to assist.
What to look for in a shareholders agreement:
Shareholders' rights of veto
Other parts of the agreement often provide that important decisions, whether or not they would ordinarily be taken by the directors or the shareholders, cannot be made unless all shareholders agree to them – so minority shareholders can veto them.
Typically, these include decisions to:
- Issue further share capital
- Change the company’s articles of association
- Buy or sell a business, or any asset of more than a certain value
- Buy any of the company’s shares back from a shareholder
- Incur capital or hire purchase commitments above a certain level
- Take out or vary insurance other than for full replacement value
- Award directors or employees more than a certain level of remuneration and/or dismiss a director or employee earning more than that remuneration
- Prevent favourable contracts or arrangements between the company and its directors or shareholders other than on agreed terms
- Acquire or dispose of any premises
- Appoint or remove a director
- Borrow above a certain level or grant security over the company’s assets
Issue and transfer of shares
Here, options include:
- Allowing minority shareholders a complete veto over any issue or transfer of shares
- Requiring the company (on an issue) and the owners of the shares (on a transfer) to offer the shares to existing shareholders, pro-rata to their holdings before they can be issued or transferred to anyone else, or in any other proportions.
If a pro-rata offer must be made, the agreement must provide a means of valuing the shares. This may be by reference to an expert, arbitrator or according to some formula in the agreement.
Rights to appoint directors
Shareholders' rights protect outside investors by allowing them to appoint a director to the board of your company, protecting their interests.
A shareholders agreement may contain a mechanism for resolving disputes. It may refer to a third party expert or arbitrator or a buy-out mechanism whereby, if a dispute occurs, one side buys out the shares of the other at a price determined in accordance with the agreement. It can even provide that, in the event of an unresolved dispute, the parties agree to vote to wind the company up.
The issue of which party buys out the other, and at what price, can be extremely difficult to negotiate. A shareholders agreement can become quite complex.
One solution is to say that one shareholder can offer his shares to the others at a price of his choosing. If they accept, they pay the price he has set. To stop the seller from setting an unrealistic price, the agreement may also provide that if the other side does not accept his offer, they become obliged to sell their shares to him. The seller will then be forced to buy the shares at the price he set. He will not want to set too high a price for his shares because he may end up having to buy their shares at that price himself.
Start creating your shareholder agreement today
VAT registration service
Need to know whether you should register for VAT? Or which VAT scheme is best suited to your business needs? We can help. Our service will help you get VAT-registered, assist in managing your VAT and help complete your monthly or quarterly VAT returns.
Are you looking for any of these services or other business advisory services? Contact our experienced accountants today.Get in touch