Share Sale vs Asset Sale: A practical guide for SME buyers and sellers

Thinking of selling or buying a business? You’ll need to choose between a share sale and an asset sale.

These are the two main ways to transfer business ownership in the UK. Each comes with different legal, tax, and practical consequences and the choice can significantly impact your net result. This guide explains the differences, so you can move forward with confidence.

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What is a share sale?

A share sale involves selling the shares in the company that owns the business. The buyer ends up owning the company; lock, stock, and barrel.

Key points:

• The buyer acquires the company as a whole (including all assets, employees, contracts, and liabilities).

• The legal entity continues but with different owners.

• The seller is the shareholder, not the business.

  
  

Example:

You own 100% of Smith & Co Ltd. You sell your shares. The buyer takes over the company which continues with the same contracts, employees, trading history, etc., but you’ve exited.

Share sales are only possible where the business is held in a company.

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What is an asset sale?

An asset sale involves selling specific parts of the business, such as contracts, goodwill, equipment, or stock. The buyer picks and chooses what it wants.

Key points:

• The buyer acquires the business or part of it not the company which operated the business.

• Only specified assets and liabilities transfer (and they must be clearly defined).

• Contracts, employees, leases, etc., do not transfer automatically, consents may be needed.

  
  

Example:

Smith & Co Ltd sells its customer contracts and website to a buyer. The buyer runs that business through their own company. Smith & Co Ltd still exists, but it no longer trades.

Asset sales are also used when buying from sole traders or partnerships.

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Tax: where deals succeed or fail

Each option comes with different tax consequences, impacting both the seller and buyer.

Sellers — why sale structure matters

Buyers — what’s deductible?

Tax implications of share sale vs. asset sale for buyer

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Legal and practical considerations

	Share sale	Asset sale
Due diligence	The buyer will likely want to do a deeper review, including focusing on liabilities, tax, HR, contracts, and disputes.	Typically focused only on the assets being acquired and transfer issues.
Contracts and licences	Most will stay in place, as there is no change to the contracting party; however, change-of-control clauses may be an issue for material or significant contracts.	May need assignments, novations (a three-party agreement), or other approvals to transfer over to the buyer.
Employees	Employment continues; there is no change of employer.	The "Transfer of Undertakings (Protection of Employment) Regulations apply, with obligations to inform and consult, which might impose potential liabilities for failure.
Deal speed	Potentially quicker as less documentation, although there may be more due diligence.	Possibly slower and more admin-heavy, as it is necessary to ensure each asset transfers properly and there may be a greater need for transitional provisions to manage the handover from the seller to the buyer.

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Which structure is right for you?

Sellers generally prefer share sales:

• A clean exit, no ongoing obligations.

• Potentially simpler and quicker.

• Often better tax treatment.

Buyers often prefer asset sales:

• Control over what’s being acquired, with less risk.

• No legacy liabilities.

• Tax reliefs on the purchase.

But preferences don’t always align, negotiation is key.

Your choice may also be driven by:

• The legal structure of the business.

• Risk appetite (especially around liabilities).

• Tax optimisation.

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Summary: Share sale or asset sale?

That said, every deal is different. Get advice early.

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What to do next

If you’re thinking about selling or buying a business, structure is one of the most important early decisions. 

Get early advice. Let’s talk through your plans:

📩 info@orbitlegal.co.uk | 📞 0115 6777095 |

Disclaimer

This content is for general information only and doesn’t constitute legal, accounting, financial, or tax advice.  It’s based on the law of England & Wales and was correct at the date of publication, but the law and guidance can change.  Reading this page doesn’t create a solicitor–client relationship with Orbit Legal.  Please take advice on your specific circumstances before acting. Get advice for your situation by contacting Orbit Legal at info@orbitlegal.co.uk or 0115 6777095.