Selling Part of a Company's Operations to Another Company

GordonBennettUK · Mar 26, 2010

From an accountancy perspective, is it possible for a company which offers a range of distinctly different services, to sell one of its services/operations to another company?

For instance, could FictionalCompany1 Ltd, which trades as Fictional Double Glazing and also trades as Fictional Books, sell its books business to FictionalCompany2 Ltd, but do so in such a way that FictionalCompany2 Ltd can operate the books business it buys under the name Fictional Books still?

What are the financial/accountancy things to consider too?

Thanks!

elaine@cheapaccounting · Mar 26, 2010

Yes it can - lots of things to consider from a legal, tax and account view point:

- business valuation
- contract of sale
- limitation of liability post sale
- tax planning for sale proceeds

to name a few

GordonBennettUK · Mar 26, 2010

Thanks. I assume it would therefore make things simpler/easier if the sale/transfer of the operations/service was aiming to take place for a nominal value even perhaps of £1 and the 90% shareholder & Director of FictionalCompany1 Ltd was also going to be a Director & majority shareholder of FictionalCompany2 Ltd - cutting out the need for a business valuation and any tax planning and also meaning the contract could be somewhat simpler?

It is more a case of FictionalCompany1 Ltd wanting to separate its distinctly different services into two Companies instead of them both going through the same one, but with the added factor that one of the Directors of FictionalCompany1 Ltd isn't interested in being part of FictionalCompany2 Ltd i.e. they are disinterested in those services and want to focus on the other ones.

elaine@cheapaccounting · Mar 26, 2010

Bu the tax planning can create a distinct advantage

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Selling Part of a Company's Operations to Another Company

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