When looking to dispose of a business, the method by which this can be achieved depends on the type of seller. If the seller is a sole trader, partnership or limited liability partnership, this will be done by way of the sale of the assets of the business. However, in the case of a company, this can be done by way of a share or asset sale. There are advantages and disadvantages of each method, depending on a number of factors, including taxation implications, reasons for disposal and the type of business you are selling. Asset Sale An asset sale means that you sell certain assets of the business, rather than the company in its entirety. Assets that often make up an asset sale include property, machinery, stock, contracts, goodwill and intellectual property. Advantages of an Asset Sale The level of warranties and indemnities a buyer should expect will be less if liabilities are to remain with you, as is often the case in an asset sale. Given the reduced number of warranties, the disclosure exercise should be a lot less involved. Where the seller is a company, any warranties and indemnities the buyer requires are given by the company, rather than the shareholders personally, although the buyer may require the shareholders to be liable, especially if it is envisaged that the company will cease to trade. You may be able to obtain tax advantages through the use of allowable losses or capital allowances balancing allowances and still obtain the benefit of entrepreneurs’ relief if the proceeds of the sale are distributed to the shareholders. Disadvantages of an Asset Sale Should you wish to discontinue trading completely, you will have to deal with closing down the company and dealing with any remaining assets and liabilities after the sale. There is a risk that you may incur a double taxation charge, which can occur through the payment by the company of corporation tax on the chargeable gains that arise on the sale and then the shareholders may have to pay income tax on the profits of an asset sale. Share Sale On a share sale, the shares in the target company are sold to the purchaser by the target company’s shareholders. This means that it is the company as a whole that is sold, including all its liabilities, rather than individual assets. Advantages of a Share Sale As the company is sold as a whole, rather than individual assets, it may be easier to maintain confidentiality around the sale. There are various potential tax advantages of a share sale, including entrepreneurs' relief, roll-over relief, and no double tax charge (as may arise as a result of an asset sale). Disadvantages of a Share Sale Any warranties required by the buyer are given by the shareholders in their personal capacity, rather than by the company. The disclosure process is likely to be more extensive due to the higher level of warranties and indemnities the buyer may expect a seller to give.