If you are buying a pharmacy, dental practice or another business, the asking price is only one part of the decision. You also need to understand exactly what you are buying and which legal entity will own it after completion.
Two transactions can describe the same trading business while giving the buyer very different rights and obligations. That is why the proposed structure belongs in your earliest conversations with your solicitor, accountant and finance broker.
What is the difference?
In a share purchase, you acquire shares in the company that operates the business. The company remains the owner of its assets and remains responsible for its liabilities. The buyer acquires the company with that history; this is not the same as personally assuming every company debt.
In an asset purchase, you acquire specified assets and rights, with the agreement identifying what is included and any liabilities assumed. This can offer more choice over the acquisition, but does not mean that every obligation can simply be excluded. Hamed Ovaisi of SO Legal explains this distinction in his share and asset purchase guide.
Compare the questions, not just the labels
| Question for your advisers | Why it belongs in the discussion |
| What precisely is included? | Identify the shares or assets, stock, premises arrangements and exclusions |
| Which contracts need review? | Ask about transfer requirements or change-of-control conditions; do not assume continuity |
| What happens to employees? | Establish whether employment transfer rules apply and what duties follow |
| Which historic issues need investigation? | Agree legal, financial and tax due diligence appropriate to the transaction |
| What tax treatment applies? | Ask for advice on the actual structure and circumstances, not a generic rule of thumb |
| Who will borrow and offer security? | Make the funding proposal consistent with the legal transaction |
An asset purchase is not automatically free of liabilities
Employment is a useful example. Where a business transfer falls within TUPE, employees’ jobs and employment terms can be protected and responsibilities can transfer to the new employer. The application of the rules depends on the transaction; ask an employment adviser to assess it. GOV.UK explains the TUPE framework.
The practical lesson is to ask what transfers by agreement and what may transfer because the law requires it. Do not assume a short list of purchased assets answers both questions.
Neither structure is always the simplest or cheapest
It is tempting to look for a universal winner. Instead, ask your advisers to compare the proposed routes using the actual business, contracts, premises and people involved. Record the assumptions and the matters still unresolved.
Tax also needs transaction-specific attention. For example, a transfer of a business as a going concern can fall outside the scope of VAT when the relevant conditions are satisfied; it is not a blanket rule that an asset sale always attracts VAT. Ask your accountant to confirm the treatment. HMRC’s VAT Notice 700/9 sets out the conditions.
Bring the proposed structure into the finance discussion
Before we explore funding, tell us whether the proposed deal is a share purchase or an asset purchase, who the proposed borrower is and what your advisers have agreed so far. If the structure is still under discussion, say so. It is better to make that uncertainty explicit than prepare a proposal on the wrong basis.
Useful information includes the sale particulars, the proposed buyer entity, the purchase price, your available contribution and an outline of what is included. If any of these change during negotiations, keep the finance team informed.
Questions to resolve before committing
Ask your solicitor and accountant: What exactly am I acquiring? What due diligence remains? Which consents or sector-specific steps need attention? What is the expected tax treatment? What conditions must be satisfied before completion?
Then discuss the resulting funding requirement with your broker. A finance indication does not replace legal or financial due diligence, and does not itself guarantee completion.
Discuss finance for your proposed purchase
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This article provides general information; your legal and tax advisers should assess your transaction.