Transferring and selling assets
Most businesses will accumulate substantial assets over time. If you need to close or sell your business, you may want to offload your assets quickly. There are effectively two ways in which you can do this - through an 'asset sale' or a 'share sale'.
What is an asset sale?
An asset sale happens when you sell or transfer the assets of your company, rather than shares or stock. These assets can be tangible (eg machinery and inventory) or intangible (eg intellectual property).
In an asset sale, you can typically choose what you want to sell. For example, you may want to sell inventory and equipment, but keep the name of your business. You individually appraise and decide the selling price for the different assets on offer.
With asset sales, the liabilities typically stay with the existing businesses unless the buyer agrees otherwise.
Asset sale vs share sale
An asset sale is different from a share sale. In a share sale (sometimes known as a stock purchase), you sell the entire business, including all its assets, liabilities and obligations, to a new owner. Once the transaction is complete, the buyer assumes responsibility for the whole company.
Asset sales can happen as:
- a partial exit - when you transfer only the select assets (eg in a spin-off situation)
- a complete exit - when you transfer all desirable assets and liabilities to a buyer, unwind what is left and liquidate the business
In both situations, the process is easier if you keep clear and accurate records of all assets in your business. As well as good records, you will also need to bear in mind:
- asset depreciation - this will affect the asset's value and how much of it you can write-off
- tax implications - if you sell for a profit, you may have to pay Capital Gains Tax
- fair market value - the highest price an asset would sell for in the open market
Negotiating asset sale or transfer
If you are selling or transferring assets without selling the business, you will need to negotiate the terms and conditions and draw up an asset purchase agreement with the buyer. If you are selling the assets as part of the sale of your business, you will need a business purchase agreement.
For more information, see understanding contracts when buying or selling a business.
There are specific considerations for selling or assigning intellectual property rights. If the rights are registered, such as trade marks or patents, you may need to notify the Intellectual Property Office of the change in ownership. See more on selling your intellectual property and licencing your IP.
You should seek professional and legal advice about selling and transferring business assets, as well as advice from an accountant. See how an accountant can help your business.
Disposal of assets
The disposal of fixed assets involves removing assets from the accounting records. This process is known as derecognition. Derecognition may require recording of a gain or loss on the sale, exchange or transfer of the asset when the disposal occurs. Find out how to record the disposal of assets.
Tax implications when you sell or transfer business assets
When you sell or transfer a business asset, you sell it for more - or less - than you originally paid it for. In either case, tax implications may arise out of your capital gain - or loss. See more on corporation tax when you see business assets and capital allowances when you sell an asset.
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