The deal structure of the sale can be made up of multiple parts, usually referred to as deal consideration. At a high level, they consist of upfront, and deferred consideration.

Director loans can either be money owed to the director, or owed to the busienss. Where the business owner has taken loans from the business previously these debts can be cleared as part of the sale of the busienss, however the owner needs to understand that this will mean changes to their potential tax costs. 

If the owner has borrowed £100,000 from the business and this forms the whole of the upfront consideration, the director may be liable for capital gains tax on this amount, meaning that they will need to find the money themselves to pay the tax bill.

eWhere an owner has other assets tied into the business these can also form part of the upfront consideration.  For example, if the owner has a company car, which has been acquired by the business, this can be given to the owner as part of the initial payment.

When including these assets, a full independent valuation is needed, for example if the owner has a company car, the value needs to be agreed prior to the sale as this will affect their tax as it will be seen as a Cash value.

Another consideration for this would be if the business owns the asset. Again with the company car as an example this may be leased or on finance, if this is the case, the finance would need to be cleared as part of the sale. If the vehicle is leased, then it may not be possible to transfer the lease into the owners name.  Consideration has to be taken as to the insurance and liability of any assets that are handed over to ensure that the company does not take additional liabilities on.

Deferred consideration refers to payments made over a longer period of time.  These protect both parties if implemented correctly and can be made up of different methods as detailed below.

Deffered payments can be made conditional based upon certain performance of the business, for example, some acquirers will limit deffered payments based on the agreed performance of the business, meaning if certain targets are not met then the deffered payments may be reduced.   Likewise some sellers will also want to receive an increased payment based on the completion of projects that have already been started. 

The previous owner receives payments based on the future performance of the business. This method works well when the seller wants to receice value from profits of the business and can be used to show belief in the profitability of the business moving forward.   The owner usually remains as part of the business to ensure targets are met to achieve the earn out payments

Deferred cash payments are a way to manage the debt hold of the business, the previous owner takes some of the value of the business as a future payment. The cash is raised by the business as either profit or future lending.

A seller can also continue to hold assets from the business for future purchase, this works well when the business has properties included in the business, the property can be held back from the sale and secured using a purchase lease option, allowing the company to buy back the property at a later date.