Should I buy the assets or the shares of a business?

Asset purchases give buyers more control and limit exposure to historical liabilities. Share purchases are simpler but mean you inherit everything, including unknown debts. The best structure depends on tax implications, the nature of key contracts, and employee considerations. Your solicitor and accountant can advise on the best approach.

How long does it take to buy a business?

A simple asset purchase can complete in 4 to 8 weeks. A share purchase with full due diligence typically takes 2 to 4 months. Complex transactions involving regulatory approvals or multiple parties can take 6 months or longer. The due diligence phase is usually the longest part.

What is TUPE and how does it affect me?

TUPE (Transfer of Undertakings, Protection of Employment) automatically transfers employees to the new owner with their existing terms, conditions, and length of service. You cannot change their terms because of the transfer. Dismissing employees because of the transfer is automatically unfair. TUPE applies to both asset and share purchases.

How much does a solicitor cost for buying a business?

Legal fees range from £2,000 to £5,000 for a simple asset purchase and £5,000 to £10,000+ for a share purchase with full due diligence. Add £2,000 to £8,000 for accountancy due diligence. Many solicitors offer staged fixed fees so you can control costs as the transaction progresses.

What happens if the seller lied about the business?

If the seller gave warranties in the purchase agreement that turn out to be untrue, you can claim damages for breach of warranty. If the seller deliberately misrepresented the business, you may also have a claim for fraudulent or negligent misrepresentation. An escrow or retention arrangement provides a fund to claim against.

Do I need to keep the existing employees?

Under TUPE, employees transfer automatically and you cannot dismiss them because of the transfer. However, you can make redundancies for genuine economic, technical, or organisational reasons after the transfer. You must follow fair redundancy procedures. Consult with employees and their representatives before making any changes.

Buying a Business? Legal Steps & Due Diligence (2026)

Asset Purchase vs Share Purchase

There are two main ways to buy a business: an asset purchase and a share purchase. In an asset purchase, you buy specific assets of the business — such as equipment, stock, customer contracts, the trading name, and goodwill. You do not buy the company itself, so you generally do not inherit the company's debts or liabilities (with some important exceptions, particularly around employee rights under TUPE).

In a share purchase, you buy the shares of the limited company that owns the business. The company continues to exist with all its assets, contracts, employees, and liabilities. This means you inherit everything — including any unknown debts, tax liabilities, or legal claims. Share purchases require more extensive due diligence to uncover potential problems.

Asset purchases are generally preferred by buyers because they offer more control over what you acquire and limit your exposure to historical liabilities. Share purchases are often preferred by sellers because they are cleaner (one transaction transfers everything) and may attract more favourable tax treatment through Capital Gains Tax Business Asset Disposal Relief (formerly Entrepreneurs' Relief).

Your solicitor will advise on the best structure based on the specific circumstances. Key factors include the tax implications for both parties, the nature of the business's contracts (some may not be assignable), employee considerations under TUPE, and any regulatory licences that may not be transferable.

Legal Due Diligence: What Your Solicitor Checks

Due diligence is the investigation process that identifies risks and verifies what the seller has told you about the business. Your solicitor will typically review several categories of information, and any issues they uncover can be used to renegotiate the price, seek specific warranties, or walk away from the deal entirely.

Company and constitutional documents are reviewed to confirm the company's legal status, shareholding structure, and any restrictions on the transfer of shares. Your solicitor will check for any charges registered against the company, outstanding judgments, and whether the company has been involved in any litigation. They will also review the minutes of directors' and shareholders' meetings for any unusual decisions.

Commercial contracts are examined to understand the business's key relationships. Your solicitor will check customer and supplier contracts for change of control clauses (which might allow the other party to terminate on a sale), restrictive terms, and outstanding obligations. Particular attention is paid to contracts that represent a significant proportion of the business's revenue.

Employment matters are reviewed carefully, as employees' rights are protected under TUPE (Transfer of Undertakings, Protection of Employment). This means employees transfer automatically with their existing terms and conditions. Your solicitor will review employment contracts, any ongoing disputes or tribunal claims, pension obligations, and redundancy liabilities. TUPE compliance is a significant area of risk in any business acquisition.

The Purchase Process Step by Step

The business purchase process typically follows a structured sequence. It begins with heads of terms (also called a letter of intent), which is a non-binding document setting out the key commercial terms agreed between buyer and seller, including the price, what is being purchased, any conditions, and the proposed timeline. Although mostly non-binding, heads of terms usually include binding confidentiality and exclusivity provisions.

Due diligence then takes place, with your solicitor and accountant examining the business in detail. The length of this process depends on the size and complexity of the business — it can take anywhere from 2 weeks for a simple asset purchase to 3 months for a complex share purchase. Your accountant will focus on financial due diligence (verifying the accounts, tax position, and profitability), while your solicitor handles legal due diligence.

The purchase agreement is then drafted and negotiated. For an asset purchase, this will be a Business Purchase Agreement. For a share purchase, it will be a Share Purchase Agreement (SPA). Both will contain detailed warranties and indemnities from the seller about the state of the business. Warranties are statements of fact that, if untrue, entitle you to claim damages. Indemnities are promises to compensate you pound-for-pound for specific losses.

Completion is the day the deal closes. The purchase price is paid (often through your solicitor), shares or assets are transferred, and you take control of the business. There is often a post-completion period for transitional support from the seller, handover of passwords and systems, and notification to customers and suppliers.

How Much Does It Cost to Buy a Business?

Legal fees for buying a business depend on the deal structure and complexity. For a straightforward asset purchase of a small business, legal fees are typically £2,000 to £5,000. For a share purchase with full due diligence, expect to pay £5,000 to £10,000 or more. Very large or complex transactions can exceed £20,000 in legal fees.

In addition to your solicitor, you will need an accountant to carry out financial due diligence and advise on the tax structure of the acquisition. Accountancy fees for due diligence typically range from £2,000 to £8,000. A business valuation, if you need one, costs £1,000 to £5,000 depending on the size and complexity of the business.

Stamp duty is payable on share purchases at 0.5 percent of the purchase price. For asset purchases, stamp duty may apply to any property being transferred (at standard SDLT rates) and potentially to goodwill. Your solicitor and accountant will advise on the specific tax implications.

If you are borrowing to fund the acquisition, your lender will usually require their own legal review, which adds to the cost. They may also require personal guarantees, security over the business assets, and specific conditions to be met before releasing funds. Factor in all of these costs when deciding on your budget for the acquisition.

Protecting Yourself After the Purchase

The purchase agreement should include comprehensive warranties from the seller covering all material aspects of the business. Key warranties include confirmation that the accounts are accurate and not misleading, that there are no undisclosed liabilities, that all material contracts have been disclosed, that the business is not involved in any litigation, and that it is compliant with all relevant laws and regulations.

You should also negotiate specific indemnities for known risks identified during due diligence. Unlike warranties (where you need to prove loss), indemnities provide pound-for-pound compensation for specified liabilities. Common indemnities cover tax liabilities arising before completion, environmental liabilities, and the cost of resolving specific issues identified during due diligence.

A retention or escrow arrangement is common, where a portion of the purchase price (typically 10 to 20 percent) is held in a solicitor's escrow account for a period after completion (usually 12 to 24 months). This gives you a readily available fund to claim against if warranty or indemnity claims arise. Without this, you would have to pursue the seller personally, which can be difficult if they have moved abroad or spent the proceeds.

Non-compete and restrictive covenants should prevent the seller from setting up or working for a competing business for a specified period (typically 2 to 3 years) and within a specified geographical area. These clauses must be reasonable to be enforceable, and your solicitor will advise on appropriate scope and duration.

Buying a Business

Quick Summary

Legal Due Diligence: What Your Solicitor Checks

The Purchase Process Step by Step

How Much Does It Cost to Buy a Business?

Protecting Yourself After the Purchase

Estimate Your Costs

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