Can I Sell My Business To An Employee Ownership Trust?


The answer is yes. You can sell a trading limited company, a partnership or a sole trade to an Employee Ownership Trust.

There are many advantages to selling your business to an Employee Ownership Trust. These include:

  1. You are not dealing with an independent buyer who will probably try and chip the price at the last moment or try and not pay all the instalments due on a deferred sale.
  2. You can set the price – at market value. It must be independently valued.
  3. The share sale, if over 51% of the share is Capital Gains Tax free. This is an incredible way to save tax on sale.
  4. It is good for your employees to own the business. There is less absenteeism and more engagement.
  5. You can stay as a shareholder and as an employee/director on a market salary.
  6. It is good for professional service firms that do not tend to have a high goodwill value on sale.

The main disadvantages are:

  1. The buying Employee Trust may have to pay for the shares by instalments over 5 to 7 years or longer. These are funds from profits.
  2. You may not achieve the best free market sale price.
  3. You may need to keep a management time involvement.

Here are some key matters to consider on an Employee Ownership Trust:

  • You do not need to sell all your shares.
  • You will need to create and Employee Trust document setting out the rules.
  • New employees can be made to wait for a probation period before they share in profits.
  • Employees who leave do not get a capital payment or a right to the shares.
  • Employees can have dividends of up to £2,000 a year tax free.

If you would like to find out more about Employee Trusts please contact David Kirk.

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