UK business exit strategies

Section 01

The main exit routes

1. 01

   Trade sale

   Selling the business to another company (a 'trade buyer') is the most common exit for successful small businesses. Trade buyers typically pay more than financial buyers because they can realise synergies. The process involves finding a buyer, negotiating heads of terms, due diligence, and completing a share purchase or asset purchase agreement. Typically takes 6–18 months.

2. 02

   Management buyout (MBO)

   Selling the business to the existing management team. The management team typically uses a combination of their own funds, bank debt, and private equity to fund the purchase. An MBO can be a good option if you want continuity and the management team is capable of running the business independently.

3. 03

   Sale to a financial buyer (private equity)

   Private equity firms buy businesses with the intention of growing them and selling them again within 3–7 years. They typically look for businesses with £500k+ EBITDA (earnings before interest, tax, depreciation and amortisation). They often want the founder to stay on for a transition period.

4. 04

   Family succession

   Passing the business to a family member. Can be done as a gift, a sale at market value, or a sale at a discounted price. Business Property Relief (BPR) may reduce or eliminate inheritance tax on the transfer. Requires careful planning to avoid family disputes and tax complications.

5. 05

   Voluntary strike-off (closing a limited company)

   If the business is no longer trading and has no significant assets or liabilities, you can apply to Companies House to strike off the company. The process takes about 3 months and costs £8. Any remaining assets must be distributed before striking off — assets left in a struck-off company become 'bona vacantia' (Crown property).

6. 06

   Members' Voluntary Liquidation (MVL)

   A formal insolvency process used to close a solvent company with significant retained profits or assets. A licensed insolvency practitioner is appointed to realise the assets and distribute them to shareholders. Distributions from an MVL are typically treated as capital gains (not income), which can be tax-efficient if Business Asset Disposal Relief applies.

Section 02

Business Asset Disposal Relief (BADR)

• Qualifying conditions: you must have owned at least 5% of the company's ordinary shares and voting rights for at least 2 years before the disposal.
• You must also have been an employee or officer of the company for at least 2 years.
• The 10% rate applies to the first £1 million of qualifying gains in your lifetime. Gains above £1 million are taxed at the standard CGT rate (18% or 24% depending on your total income).
• BADR does not apply to assets held personally (e.g. property owned personally and used by the business).
• Get tax advice before any exit — the rules are complex and the savings can be substantial.

Section 03

Preparing your business for sale

• Clean up your accounts: ensure your financial records are accurate, up to date, and audited if possible. Remove personal expenses from the business.
• Reduce founder dependency: document processes, build a management team, and ensure the business can operate without you.
• Protect your IP: register trademarks, ensure IP is owned by the company (not the founder personally), and have contractor IP assignment clauses in place.
• Tidy up contracts: ensure customer and supplier contracts are in writing, transferable, and not about to expire.
• Resolve disputes: settle any outstanding legal disputes or HMRC enquiries before going to market.
• Understand your valuation: most small businesses are valued at 3–8x EBITDA, depending on sector, growth rate, and customer concentration.

Section 04

Closing a limited company — step by step

• Stop trading and close the business bank account (or reduce the balance to zero).
• Pay all outstanding debts — creditors, HMRC (VAT, PAYE, Corporation Tax), and employees.
• File your final accounts and Corporation Tax return with HMRC.
• Distribute any remaining assets to shareholders. Distributions of up to £25,000 can be treated as capital (potentially eligible for BADR). Larger distributions should be made via an MVL.
• Apply to Companies House to strike off the company using form DS01 (£8 online).
• Companies House publishes a notice in the Gazette. If no objections are received within 2 months, the company is struck off.