buying a limited company

[peter flett]

I'm currently in negotiation to purchase a limited company - my advisors are keen that I purchase only the assets, goodwill and brand - leaving all possible issues with the previous owners. The current owners and their agents are keen to sell the complete ownership of the company - with garantees, insurances, escrow funds etc all in place - as it supposedly is more tax efficient (they are retiring).

Can someone explain the benefits to the current owners - or is this a way just to ensure that all liabilities are passed on and away from them?

Are there any benefits for going the ownership route for me?

[Hombre]

Need to know more as to what the company does/is.

If for example it is a property investment company then in my experience not much benefit going down Co. acq. route if assets less than £2 million due to legal costs etc, etc.

[David Griffiths]

It's the classic situation. It's generally better for a buyer to purchase assets and goodwill from the company, and it's generally better for the vendors to sell the company as they will normally pay less tax that way.

That's the benefit to the vendors - tax savings. Although the liabilities would stay with the company, the purchase agreement will normally include quite extensvie warranties to make sure that the purchaser can get them from the vendors after the sale.

It's typically more costly in terms of legal and professional fees to buy a company because the agreement is more complex and you need to do more due diligence work on the company.

So with one set of advisors pushing one way and the other set pushing the other way, something will have to give. First one to blink?

[Rolo Tomasi]

Dont forget to factor stamp duty into the cost of purchasing the business. This is at 0.5% if you purchase shares but can be up to 4% on assets. Depending on how much you are paying this could make it more tax efficient to buy the shares.

You also need to ask your advisors how much tax you will pay under the different options when you eventually sell the business. A little exit planning now may pay dividends in the future.

[Hombre]

That was my very point about buying a property investment company versus just the assets. It's a stamp duty 'play'.