Sell a limited liability company: Profitable in 8 steps
Incl. special cases
Would you like to sell a GmbH and know which steps and aspects you need to consider? In this guide, we show you the eight most important steps to successfully sell your GmbH. Benefit from our expertise and get comprehensive advice.
1 February 2022 / By Wolfgang Bürger
The most common use case for the sale of a healthy GmbH is the complete transfer of the company. It deals with the scenario of a complete handover. It is like a usual Company sale to consider. In addition, further variants are explained.
You will gain insights into the sale of GmbH shares and the sale of an insolvent GmbH. You will also be informed about the sale of a “shell” GmbH. You will expand your knowledge with suitable recommendations for action in the respective special cases.
Selling a GmbH in 8 steps:
The sale of a GmbH follows a structured process with eight key stages, from the identification of the buyer to the final closing. Each step requires careful planning and expert support to ensure a successful company sale.
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1. buy side: strategic and financial investors
When selling a limited liability company, it is important to consider both financial and strategic investors. Financial investors provide capital and are usually focused on short-term returns (5-6 years), while strategic investors bring more than just money and ideally complement or strengthen the business model.
Strategic investors can bring in industry knowledge, customer relationships or other resourcesthat can support the growth of the GmbH. Ultimately, the choice between financial and strategic investors depends on the seller’s objectives and the needs of the company.
2. company exposé, NDA and LoI
When selling a GmbH, preparation requires a number of steps, including the preparation of a Company exposéswhich contains detailed information about the company, the preparation and signing of a NDA (Non-Disclosure Agreement)) between all parties involved (before the exposé exchange) and the subsequent development of a Lol (Letter of Intent)in which the most important conditions for the potential sale are set out. Nevertheless, a letter of intent, such as the LoI, is not legally binding for either party.
3. risk assessment via due diligence
The company audit by the buyer (Due Diligence) is an important step in the sale of the GmbH. Prospective buyers thereby thoroughly examine the company to be sold. A digital data room is usually set up. Exceptions are smaller company structures where this can also be done manually with a few file folders.
During due diligence, potential buyers assess the risks associated with buying a business before making a decision. This includes reviewing financial statements, analysing market trends, assessing compliance with laws and regulations, risks of any kind and evaluating tax implications and much more.
This gives company auditors and tax consultants access to all relevant documents of the GmbH from the prospective buyer. This enables you to carry out a company analysis. Strengths and weaknesses as well as risk potentials are analysed and thoroughly evaluated.
If the analysis is positive, the interest in buying increases. A detailed detailed analysis of all aspects of the company follows. As a shareholder, you must make the documents available for inspection. It is therefore advisable to start collecting data at an early stage. After all, the employees should not notice at this early stage.
Questions must be answered conscientiously and above all truthfully. In the case of extensive company structures, discussions with executives must often be permitted. However, this should be one of the last steps, organised shortly with or before the signing of the purchase contract.
The Due Diligence Checklist in the advanced stage includes, among others, the following aspects:
4 The company purchase agreement
The company purchase agreement shapes the conditions under which the sale of a limited liability company takes place, including details of the Rights and obligations of the buyer and the sellerthe pricing, the payment modalities (e.g. direct or deferred payment via earn out), the guarantees and other important information as well as the legal framework.
This contract should be carefully considered by both parties before signing, as it may have significant implications for all parties involved.
5 Share Deal and Asset Deal
When selling a limited liability company, you may be confronted with the terms Share Deal vs. Asset Deal come into contact. A limited liability company can be sold either through a share deal or an asset deal.
With a Share Deal the future shareholder acquires the GmbH shares of the company from the seller and assumes full responsibility for the company in its ‘current’ structure. structure. In the case of a Asset Deal If the buyer acquires only some or all of the Assets of the GmbH from the seller and is responsible for all liabilities or rights and obligations associated with these assets. The legal shell of the company remains with the seller.
6. taxes on the sale of the GmbH
In principle, the capital gain of a GmbH is recognised in accordance with § 17 EStG taxed. We have prepared a sample invoice for you for the taxes incurred when selling a GmbH. You can access it directly here To the sample invoice.
In our article we give sellers 8 tips for optimal taxation. Read more here.
7. disagreements on the sale of the company
Following mergers and acquisitions, disputes may arise between the buyer and the seller if the terms of the purchase agreement are not complied with or if one party believes that the other party has not fulfilled its obligations.
These disputes can be costly and time-consuming. This makes it all the more important to precisely record and formulate the agreed objectives and framework conditions. To avoid such disputes, it is important to have clear and detailed contracts[P1] and to ensure effective communication between all parties involved. Both sides should therefore choose experienced lawyers from the corporate post-employment environment and not the previous in-house lawyer for personnel or contractual issues.
8. sale of shares and other special cases
The sale of a GmbH is complex and can have the most diverse occasions. Therefore, we present various special cases below, such as the sale of an insolvent GmbH or a shell GmbH. Click here to go directly to the relevant section.
Notes on the formalities and legal framework
The formal and legal aspects of a GmbH sale must be precisely adhered to in order to ensure legal certainty. This includes notarisation, entries in the commercial register and compliance with various laws such as the GmbH Act and company purchase law.
In addition to technical terms such as Share deal or asset deal the sale of a limited liability company involves further stumbling blocks. To avoid these, In the following, you will find important information that must be observed when selling a corporation.
Formalities
A sale of a GmbH must be notarised in order to be legally binding. The notary is responsible for complying with the formalities and informing both parties about important aspects of the sale. Furthermore, the notary also takes over the obligatory registrations with the commercial register.
When an existing business is sold, all rights and obligations are transferred from the GmbH to the buyer. Furthermore, the buyer takes over all assets together with the company. As a rule, all liabilities remain with the company. They are not transferred to the buyer company or to the buyer’s private person. The buyer must also assume all rights and obligations of all employment contracts or other contracts (e.g. rental agreements or leasing contracts) on a 1:1 basis.
It is important that the articles of association of the GmbH and the concluded company agreements (shareholders’ agreement) are taken into account. We will be happy to advise you on pitfalls regarding existing agreements.
Legal framework
In this context, it is essential to distinguish between the terms ?Letter of Intent? and ?Company purchase agreement?. The Letter of Intent is non-binding with regard to the future conclusion of the contract and represents a declaration of intent prior to the DD.
The Company purchase agreement is a legally binding document. Nevertheless, experience has shown that the letter of intent should not be dispensed with when selling a GmbH.
It separates the wheat from the chaff of interested parties and creates binding clarity on the most important parameters for a sale between buyer and seller.
Every limited liability company has articles of association or partnership agreement. These specify any Rights and duties between the GmbH shareholders and the GmbH recorded. If there is a single owner, a model statute is often used. If there are several owners, on the other hand, there are often complex control rights and sales restrictions. In order to identify possible undesirable regulations at an early stage, these articles of association should be checked before acquiring the GmbH.It is important for purchasers and sellers of a GmbH to check such articles of association at an early stage. In this way, unpleasant surprises are avoided at the notary’s office.
Next steps
As an attentive reader, you have already received valuable information on the sale of a limited liability company up to this point. If you now Moving from theory to practice you can enter your Calculate enterprise value. This provides you with a good basis for further decisions.You want to sell your GmbH and have other questions first? A professional M&A consulting provides you with security.
Selling a healthy GmbH as a whole
The sale of an economically sound GmbH offers optimal negotiating positions and attractive sales prices. A solid company structure, stable turnover and sustainable profits significantly increase the company value and make the GmbH particularly interesting for potential buyers.
As a seller of a limited liability company, it is advisable to, the entire Company sale procedure to plan thoroughly. The reason for your decision to sell usually also determines your strategy going forward. Are you interested in a prompt sale or is a maximum sale price your priority? Do you want to sell 100 % or a stake first?I
In line with your sales strategy, you all sales documents together. An appropriate company valuation is of central importance to the process. Details on these important steps can be found in our article on the topic Sell company. It is also useful to understand the position of the buyer. This way you can prepare yourself for possible conflicts.
You have made the initial contact with a prospective buyer and want to start the vetting process with the potential buyer after signing a lol. The examination, also Due Diligence (DD) This involves a comprehensive review of all relevant documents of a company.
Although you as the seller can also arrange for due diligence, it is usually the buyer who wants to make use of this expertise. They want to rule out risks and develop an appropriate purchase price. With a purchase offer, the Negotiation phase between the two parties. If the negotiations end with an agreement, the modalities must be laid down in a contract.
The conclusion of the M&A process in the execution and eventual handover phase. The latter can take place in a few days, but can take a very long time Detailed information on all facets of the transaction can also be found in the article Sell company.
While the general process of selling a limited liability company is similar to the process of selling a limited liability company in special circumstances, there are some relevant aspects that need to be considered. to pay special attention to when selling a GmbH (limited liability company) applies. In the following we therefore deal with important special cases when selling a GmbH.
Sell GmbH shares
When selling GmbH shares, it is possible to sell only part of the company, which can offer strategic advantages. A shareholder may, after §15 GmbHGsell or bequeath his shares. However, the partial transfer requires precise contractual provisions regarding future decision-making powers and profit distribution between the shareholders.
The GmbHG clarifies that GmbH shares can be sold as long as no agreements from the articles of association are violated. A company valuation is always recommended for the sale of GmbH shares. The transaction has strong parallels to the general sale of a GmbH. A notary is also required.
Selling an insolvent GmbH
The sale of an insolvent GmbH is subject to special legal conditions and usually takes place as part of insolvency proceedings. Despite the difficult initial situation, valuable assets, customer bases or market positions can be attractive for certain buyers.
The prerequisite is that the company has not yet filed for insolvency. In addition, there must be no arrears with social security institutions.
A Advantage of the sale of an insolvent GmbH results for you in a direct way: The good reputation as managing director can presumably be maintained (if the rescue via the sale is successful). Likewise, the creditworthiness can presumably be maintained with new owners. Insolvency can therefore be prevented or better utilised for the future of the company with a new shareholder in line with the business model. The same applies here as with all transaction issues: Every case is different.
Furthermore, the successor company can appoint its own managing director. You yourself as the seller will no longer be called upon to satisfy claims for damages. Criminal law consequences are avoided.
As insolvency can be a sensitive issue, individual advice is strongly recommended.
Can you sell a limited liability company with debts?
A GmbH with debts can certainly be sold, whereby the liabilities reduce the purchase price accordingly. The decisive factor is the transparent disclosure of all financial obligations and realistic pricing that takes the debt burden into account appropriately.
The sale of an indebted GmbH can be a quick and elegant solution for the seller. Managing directors are released from their obligations. They can avoid any liability risks and claims for damages that would threaten them in the event of regular insolvency due to over-indebtedness.
There are interested parties who are interested in indebted GmbHs. An investor with sufficient funds can profit from the situation. However, it is important that not yet filed for insolvency has been. It is therefore essential that you check your options in the event of impending insolvency.
Sell limited liability company shell
The sale of a GmbH shell company without active business activities may be of interest to buyers who wish to utilise an existing legal form. This special form of sale is subject to strict tax and legal regulations to prevent abuse.
Shell companies are decommissioned companies that have given up their previous activities. The buyer can revitalise this shell company under certain conditions. He can then continue to use it with a different business purpose if necessary. It is generally the case that case law recognises the corresponding use of the shell company as a economic start-up understands. It treats buyers of shell companies like founders of a GmbH.
This interesting process can be an interesting option depending on the state of a company and its business model. However, as there are pitfalls here too, the transaction should be scrutinised carefully. The advice of an experienced management consultancy is undoubtedly useful.
Valuation of a GmbH & pricing
It is obvious that sellers want to achieve the highest possible price. Buyers, on the other hand, want to pay the lowest possible purchase price when selling a GmbH. This section is not intended to deal with negotiating skills. The focus is on the valuation of a GmbH. How is a (preferably) accurate enterprise value calculated?
For the determination of an asking price, a Business valuation essential. A company valuation can never describe a ‘correct’ value. value. However, it does provide useful guidelines or even objectified estimates of the value of the GmbH.
There are several methods to choose from. Each method offers a different combination of effort, required data and accuracy of the output. This starts, for example, with a rule of thumb that refers to the EBIT (earnings before interest and taxes) and is referred to as the multiples method.
Stock exchanges and consultants determine the industry factor for the respective company and multiply it by the EBIT. Done.
Suitable sector factors for small and medium-sized enterprises are the so-called ?SME Multiples?. These are empirical values determined from previous, real transactions. The fact that this rule of thumb can only provide a rough orientation is obvious with the few data required. The individual characteristics of companies and industries are not taken into account.
Note on the determination of the purchase price by means of a so-called multiple method: There are continuous records of real transactions and their values. From this, very rough industry clusters are formed and a range from - to is reproduced.
For example, a multiplier in a sector can be between 3 and 7, especially for small companies.
The exact and current SME multiples, can be found here.
Other valuation methods, such as the capitalised earnings value method according to IDWS1, take an individual approach to all the details of a company and therefore provide a much more realistic picture. A detailed list of the methods and a practical calculator can be found in the article Calculate enterprise value.
Taxes on the sale of a GmbH at a glance
The Tax aspects of the sale of a GmbH are complex and include trade tax, corporation tax and possibly income tax at shareholder level. Early tax planning can bring considerable tax advantages and optimise after-tax returns.
Of course, there is a not inconsiderable amount of taxation in the case of a GmbH sale. It is therefore Indispensabletaxation must be taken into account for every transaction. For the sale of a limited liability company in Germany, the so-called Partial income procedure to be applied, which in the § 32d para. 2 no. 3 EStG is defined. It clearly sets out how the shareholder’s income is to be treated in the event of a GmbH sale. At the same time, legal constructs prior to a sale can also significantly reduce the tax burden.
Sample calculation of the taxation of a GmbH sale
Disposal price | 800.000 ? |
- Share capital | 25.000 ? |
- Lawyers & Tax Consultants | 20.000 ? |
- Other costs, e.g. succession counsellor | 15.000 ? |
= Capital gain | 740.000 ? |
Taxable amount (60%) | 444.000 ? |
Result: In this example, 444,000 ? must therefore be taxed at the personal tax rate.
Taxation is regulated in § 17 EStG. Due to the importance of this topic, it is advisable to read the article Company sale taxes in more detail.
You are welcome to read more about the topic here.
On which stock exchange is a GmbH for sale?
Choosing the right sales platform is crucial for the success and discretion of a GmbH sale. Specialised succession exchanges, management consultants or industry-specific networks offer different advantages and disadvantages in terms of reach and confidentiality.
In order to find a buyer for the GmbH, it makes sense to achieve the greatest possible diversification of the anonymous sales information to achieve. Potential buyers can be found both nationally and internationally. It therefore makes sense to use the Internet to ensure that the sales offer has a broad impact.
Reputable and well-known portals in German-speaking countries are ?DUB?, ?nexxt-change? and the ?KERN Company exchange?. The providers mentioned offer security, a sensitive handling of the data and a high reach. These are the ideal conditions if you want to sell a GmbH.
Our expert tip: On the one hand, an advertisement should contain all the important information to attract interested parties. On the other hand, certain information can have unintended consequences.
If, for example, it can be deduced from the advertisement which GmbH is being offered for sale, the lost anonymity can lead to problems with customers or employees. In the worst case, this can contribute to the failure of the business acquisition.
Find attractive companies for sale in our company exchange or advertise your GmbH
Mistakes to avoid when selling a GmbH
There are risks that you should avoid at all costs when selling a limited liability company:
Inadequate designations:
The subjects of the contract must always be described specifically in the contract. Individual assets are often forgotten. The effort involved should never be underestimated.
Warranty details and claims for damages:
All balances must be correct. The balance sheets must be prepared truthfully. As a shareholder, you must give guarantees for the balance sheets. Likewise for the non-existence of further liabilities. In doing so, you can be walking on dangerous ice. You are also liable for errors made, for example, by the tax advisor when preparing the balance sheets. In case of doubt, special M&A insurances are recommended for the seller.
GmbH sold - who is liable?
The important protection of the buyer against defects of title and quality is very far-reaching in the sale of a limited liability company. If a defect has become known, the buyer must inform the seller and the seller is given time for supplementary performance. If the supplementary performance does not take place, the buyer may even be entitled to withdraw from the purchase contract.
Exclude subsequent liability of a shareholder after sale of the GmbH:
With the sale, you transfer your GmbH shares and the shareholder position you held until then. You are liable for any contributions not made. Even long after a sale process, an insolvency administrator can look for the liabilities and claim them.
Continuing the business:
After signing the contract and until the transfer of the GmbH shares, several weeks may pass. In the meantime, you as a shareholder can still influence the liquidity of the company. Thus, profit could be withdrawn.
Invoices cannot be paid. Maintenance and repairs as well as investments may be omitted. This creates liability traps for you. The buyer could now claim that the loss must be compensated. In order to avoid disputes during the purchase, a Past practice clause be built into the contract.
If possible, the stumbling blocks explained should be Company purchase agreement be clearly stated.
We have a useful overview for you here.
Selling a limited liability company: Experiences of an entrepreneur with over 70 employees
Experience reports show that a realistic asking price, professional advice and thorough preparation are key success factors. Many sellers report that emotional aspects and succession planning are often underestimated challenges.
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More InformationThe sale of a limited liability company is an expense that should not be underestimated. However, this burden can be significantly reduced by a good partner. You are also welcome to refer to the experience reports of our clients.
Conclusion
The sale of a GmbH is an exciting topic with various strategies and procedures. You can choose from various formulas when calculating the company value. These all have advantages and disadvantages.
Are you also considering special cases? Do you want to sell an insolvent GmbH or a shell GmbH? Then new risks arise ? but also opportunities.
The general transaction process basically draws a helpful red line. However, the individual circumstances must always be taken into account.
The special project of a GmbH sale requires a high level of professionalism and a great deal of experience in the complexity of a company sale. As in other sectors, experience and reliability are among the most important characteristics for an optimal sale in the M&A segment. Company sale.
FAQ
Use your personal and professional networks to approach potential buyers. In addition, hire a broker or M&A advisor to help you identify and contact potential buyers. However, clarify beforehand how far these advisors are allowed to act in the market without your knowledge. Ensure that you have the right to object to any interested party.
First, make sure that your GmbH enjoys a good reputation, is economically stable and successful, and has attractive prospects for the future. Next, have an objectified market value of your company determined.
Take time to further develop the value of your company and perhaps only start selling 2-3 years later.
Finally, you should work with an experienced M&A advisor who will help you find potential buyers and negotiate the best possible purchase price for your business.
One is that they do not clearly define the value of their business and know themselves which assets to sell and at what price.… Another is that they do not seek professional help to properly value their business. Finally, some sellers do not take the time to understand the tax implications of selling their GmbH.
About the author
Born in 1971, banker, FH degree in business administration specialising in banking/financing, certified systemic consultant and coach specialising in strategy development, change management and succession processes in companies, expert in corporate succession. Lecturer at various academies. Learn more >