Be careful here...when "purchasing a company" there's two very different things you can do:
1) buy the share capital of the company. This way you take over the company as is. There was no goodwill before you bought it, and there's none afterwards either.
The excess you pay over the net assets will simply leave you with a higher base cost against capital gains if you sell the company in the future.
In this scenario it also makes a big difference whether you personally buy the shares (hence you perhaps own two Limited Companies yourself), or whether your existing Ltd Co purchases the shares (in which you have a small group of companies).
Aside from the tax aspects, bear in mind you not only buy all the good stuff you want, but you'll also inherit with it any hidden nasties, such as warranties, or lawsuits against the company which have not yet come to fruition.
2) buy the trade and assets from the company. This way they are all effectively brought into your existing company, and you simply have one larger company going forward.
Any excess you pay over the net assets will be goodwill, which (provided you bought from an independent third party), should be reviewed for impairment annually. Any impairment is fully tax deductible for your company.
The seller is then simply left with a shell of a company with a load of cash in it (being the sale proceeds). Any hidden liabilities stay within this shell of a company, hence no risk to you.
Therefore typically the buyer (ie you) wants to buy the trade and assets. The seller however often would rather sell the shares, as they would typically get much better tax treatment (capital gain with entrepreneurs relief as an individual, rather than a chargeable gain within the company, with further tax when they extract the funds).
There are also further considerations such as possible stamp duty payable on the shares, and also VAT issues on the transaction, so have a chat with a suitably qualified accountant before jumping into a transaction like this.
1) buy the share capital of the company. This way you take over the company as is. There was no goodwill before you bought it, and there's none afterwards either.
The excess you pay over the net assets will simply leave you with a higher base cost against capital gains if you sell the company in the future.
In this scenario it also makes a big difference whether you personally buy the shares (hence you perhaps own two Limited Companies yourself), or whether your existing Ltd Co purchases the shares (in which you have a small group of companies).
Aside from the tax aspects, bear in mind you not only buy all the good stuff you want, but you'll also inherit with it any hidden nasties, such as warranties, or lawsuits against the company which have not yet come to fruition.
2) buy the trade and assets from the company. This way they are all effectively brought into your existing company, and you simply have one larger company going forward.
Any excess you pay over the net assets will be goodwill, which (provided you bought from an independent third party), should be reviewed for impairment annually. Any impairment is fully tax deductible for your company.
The seller is then simply left with a shell of a company with a load of cash in it (being the sale proceeds). Any hidden liabilities stay within this shell of a company, hence no risk to you.
Therefore typically the buyer (ie you) wants to buy the trade and assets. The seller however often would rather sell the shares, as they would typically get much better tax treatment (capital gain with entrepreneurs relief as an individual, rather than a chargeable gain within the company, with further tax when they extract the funds).
There are also further considerations such as possible stamp duty payable on the shares, and also VAT issues on the transaction, so have a chat with a suitably qualified accountant before jumping into a transaction like this.
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