Deciding to sell your business is a major decision, and if your business is a partnership, there are several legal aspects you will need to consider. Your responsibilities when selling a partnership depend on whether you’re simply selling your share of the partnership or the entire partnership business.
We cover these considerations and more as we discuss how to sell a partnership business.
Are you looking for general information on how to sell your business? Read our 5 top tips on how to sell a business.
How do I sell a partnership business?
If you are selling the entire business, you will need to ensure you:
- Inform your employees about the sale and take legal advice as to whether or not the provisions of TUPE apply
- Instruct a professional valuer to value the business properly, including its assets and goodwill
- Notify HMRC to cancel your Class 2 National Insurance contributions
- Send a Partnership Tax Return and a Self-Assessment Tax Return (this applies to all partners) to HMRC by the required deadline
- Pay any Capital Gains Tax made on the business sale and/or its assets. Make sure you take advice on claiming tax relief, such as Entrepreneurs Relief
- Notify your landlord and comply with the yielding up and any other covenants in your commercial lease
How do I sell my partnership interest to another person?
If one partner wishes to resign from an ordinary partnership and there is no Partnership Agreement, the partnership must be fully dissolved and reformed by the remaining partners. It can be challenging for the business as it means having to terminate contracts, leases, supplier agreements, and closing the company for a period.
The Partnership Agreement should set out the processes and procedures to follow if one partner is looking to sell the partnership interest to another partner. In the case of an LLP, the Members’ Agreement will detail how the sale of one partner’s share to either a third party or an existing partner in the business is to be managed.
If you sell your share of a partnership, you must complete a Self-Assessment tax return.
How do I find potential buyers?
Your business is a product of your hard work, so finding the right buyer is at the top of your priorities. For your brand and existing staff, it’s a good idea to find someone that you trust to carry on its legacy. There are many things you can do to find yourself the perfect buyer for your partnership business:
- Get an evaluation – With a formal assessment, you can provide buyers with tangible evidence that your business is worth what you say it is
- Put the word out – ‘Word of mouth’ may help you to sell your business partnership via friends, acquaintances, and business contacts. If you wish to keep the sale confidential (from staff, competitors, customers, and suppliers), it can be challenging to do this
- Advertise – With the help of a business broker, you’ll be able to get the word out to a broader circle of contacts that you’re intending on selling your business partnership
- Meet with the buyer and the other partners – If you are the only partner wanting to sell, the partners need to agree on the transfer to the new partner. If the entire business is being sold, all partners (business owners) must agree on the terms of the sale, including the sale price
Get legal assistance from LawBite
Investing in expert legal advice is essential whether you sell your entire partnership business or simply your share. A professionally drafted Partnership Agreement must be in place to ensure the sale of your partnership business or share of the partnership goes smoothly.
Our commercial law solicitors will ensure you have all the information concerning the sale of a partnership and take care of all the legal aspects of the deal for you. To find out how we can help you on all matters concerning LLPs, book a free 15 minute consultation or call us on 020 3808 8314.
