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When selling or buying a business, the structure matters. A share sale transfers ownership of the company itself, including all its liabilities and contracts, while an asset sale allows buyers to acquire only selected assets. Each route has distinct legal, tax and commercial implications, making early legal advice essential for a smooth transaction.

Understand the key differences between share and asset sales when buying or selling a business in the UK.

<p>When buying or selling a business, the structure of the transaction matters as much as the price. Whether the deal is structured as a share sale or an asset sale will shape the legal documents, tax treatment, liabilities and commercial dynamics of the deal.</p>
<p>Both structures are common, but they serve different strategic goals for buyers and sellers. Choosing the right one requires an understanding of what each route entails.</p>
<h2>What is a share sale?</h2>
<p>A share sale involves the transfer of shares in a company from the seller to the buyer. This means the buyer acquires ownership of the company itself, including all its assets, employees, liabilities and contracts.</p>
<p>This is because shares represent units of ownership of a company. If someone owns 100% of a company’s shares, the own the whole company, 50% shares would mean half, and so on.</p>
<p>For more information on shares, take a look at our article ‘<a href="https://www.linnearlegal.co.uk/resources/how-to-issue-shares-in-your-company/">How to issue shares in your company</a>’.</p>
<h3>Legal structure and what is transferred</h3>
<p>In a share sale, the company remains the same legal entity before and after the transaction. All operational contracts, employment agreements, intellectual property and obligations remain in place, often with minimal disruption. This can mean a smooth transition for employees and contractors, and no disruption to business operations, which is a huge benefit.</p>
<h3>Simplicity for the buyer vs seller</h3>
<p>From the seller&#8217;s perspective, a share sale is typically more straightforward. They sell their shares and give up their ownership of the company, making it easier for them to exit the business. For buyers, however, it can be riskier as they inherit the entire history of the company – including any liabilities they may not yet be aware of.</p>
<h3>Treatment of liabilities and employees</h3>
<p>The buyer takes on all liabilities of the company, including historic tax obligations, employment claims, contractual liabilities and compliance risks (this is why documents are drafted with warranties and indemnities – to help mitigate this risk). Employees remain employed by the same entity, so the process is seamless from an employment law perspective. Employees remain employed at the same company after the sale.</p>
<h2>What is an asset sale?</h2>
<p>An asset sale involves the purchase of specific assets and rights from a business, rather than the shares in the company that owns them. The buyer can select which parts of the business to acquire.</p>
<p>Assets and rights are the tangible and intangible property of a company, as well as any contractual or legal entitlements.</p>
<h3>Buyer selectivity</h3>
<p>The buyer can cherry-pick the assets they want – such as equipment, contracts, IP, goodwill or stock – and leave behind others. This makes asset sales particularly appealing where the business has liabilities or obligations the buyer wishes to avoid.</p>
<h3>Common in distressed or asset-heavy businesses</h3>
<p>Asset sales are often used in distressed sales or when selling divisions of a larger business. They are also common in asset-heavy industries, such as manufacturing or logistics. This is because, when a business is in financial difficulty or going through an insolvency or restructuring, buyers are usually reluctant to take on the company and its baggage.</p>
<p>An asset sale allows the buyer to acquire only the valuable parts (e.g. equipment, customer lists, IP), without inheriting the seller’s legal obligations, debts or disputes.</p>
<h3>Impact on contracts, employees, licences</h3>
<p>In a share sale, contracts, licences and employment agreements do not transfer &#8211; they remain with the company, which continues as the same legal entity before and after the sale. This continuity typically means there is no need for novation or consent from third parties.</p>
<p>By contrast, in an asset sale, these agreements must be individually assigned, which can trigger consent requirements or regulatory approvals. Many require novation or consent. Employees may need to transfer under TUPE (<a href="https://www.gov.uk/transfers-takeovers">Transfer of Undertakings Protection of Employment</a>) regulations, which can complicate the process.</p>
<h2>Key differences: legal, tax and commercial</h2>
<h3>Tax treatment and reliefs</h3>
<p>The tax implications can differ significantly. In a share sale, the buyer will need to pay stamp duty on the shares. Share sales may also qualify for <a href="https://www.gov.uk/business-asset-disposal-relief">Business Asset Disposal Relief</a> (formerly Entrepreneurs’ Relief), reducing the seller’s tax bill.</p>
<p>In contrast, asset sales can trigger capital allowances issues, VAT considerations and multiple layers of tax. Buyers and sellers should each take tax advice early.</p>
<h3>Liability risk and warranties</h3>
<p>Buyers in a share sale take on greater historic liability risk, so they will typically seek broader warranties and indemnities from the seller. In an asset sale, the buyer assumes only those liabilities explicitly agreed.</p>
<h3>Transfer mechanics and documentation</h3>
<p>Asset sales require individual transfers for each asset, including property, contracts, employees and IP. This can make the legal process longer and more complex. Share sales, by contrast, generally transfer everything in one go with a share purchase agreement.</p>
<h2>Choosing the right structure</h2>
<h3>Practical considerations</h3>
<p>The right structure depends on many factors, including:</p>
<ul>
<li>Whether the buyer wants the whole company or only certain parts</li>
<li>The existence of legacy liabilities</li>
<li>The sector and regulatory environment</li>
<li>Tax efficiency</li>
<li>The preferences of the buyer and seller</li>
</ul>
<h3>Role of legal and tax advisers</h3>
<p>There is no one-size-fits-all answer. Legal and tax advice is essential in structuring the sale to achieve the best outcome. Sellers in particular should understand the buyer&#8217;s concerns and prepare accordingly, and buyers need to understand what they will be acquiring. For both parties involved, it’s important to know exactly what you’re getting out of the process.</p>
<h3>The right choice for your business</h3>
<p>Choosing between a share or asset sale is a strategic decision that shapes the entire transaction. Our legal team can help you weigh your options, prepare the right documentation, and structure the deal to protect your position and meet your objectives.</p>
<p>If you&#8217;re planning to buy or sell a business, <a href="https://linnearcms.wpenginepowered.com/get-in-touch/">get in touch</a> with Linnear Legal to discuss the most effective path forward.</p>


Share and asset sales involve fundamentally different approaches to ownership, liability and taxation. This article outlines how each structure works and how to choose the right one.

What’s the difference between a share sale and an asset sale?

Discover the key differences between share and asset sales. Learn how each structure affects liability, contracts, taxes and legal strategy.

What’s the difference between a share sale and an asset sale? | Linnear Legal

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What’s the difference between a share sale and an asset sale?

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