Selling a small family business is rarely just a commercial decision. In many cases, it is tied up with years of hard work, family relationships, and a sense of identity. That emotional side is completely normal, but it can make the legal side harder if it is not handled carefully.
We regularly advise owners who have run a business with parents, siblings, partners or children. The legal issues are often similar to any other business sale, but the family dynamic adds an extra layer. This article looks at the legal aspects you should think about when selling a small family business, to help guide you through the process.
Family Businesses Often Run Informally
Many small family businesses grow organically. Sometimes decisions are made around the kitchen table, and roles overlap without clear distinctions between them. It’s also pretty common to find that there simply isn’t a written record of important aspects of the business.
While this informality often works well while the business stays in the family, it can cause problems when it comes time to sell. Buyers will understandably expect clarity, and they want to know what they’re getting themselves into. You’ll need to be able to present them with documents that reflect how the business actually operates. But if arrangements exist only as verbal agreements or long-standing understandings, then you have a problem on your hands. Bringing those arrangements into line before you sell usually makes the process smoother.
Who Owns What?
Ownership is one of the first legal points buyers look at. In family businesses, share ownership does not always reflect day-to-day involvement. One family member may run the business, while others hold shares but play little role. Sometimes shares have been transferred over time without much thought to the future.
Before you sell, you should understand who owns what, what rights attach to those shares, and whether everyone agrees with the proposed sale. A buyer will want comfort that all relevant owners support the deal and have authority to proceed.
Decision Making and Control
Linked to ownership is control. Buyers will look at who makes decisions and how. If control lies with one individual but ownership is split across the family, that can raise questions. If decisions require informal family consensus rather than formal approval, that can also cause concern. Clarifying how decisions are made and documented helps buyers feel more comfortable and avoids misunderstandings further down the road.
Employment and Family Members
Family members sometimes work in the business without formal contracts. Some may receive flexible pay, benefits, or roles that evolved over time. During a sale, buyers will review employment arrangements closely. They will want to know who is employed, on what terms, and whether any family members have special arrangements.
This does not mean those arrangements are wrong, but it does mean they should be clear. You’ll need to clarify any certainty around notice periods, pay, or expectations after completion, or expect plenty of follow-up questions from the buyer.
What Happens After the Sale?
In a family business sale, buyers often ask whether family members will stay involved after completion. For some buyers, they want that continuity. But others will want to make changes quickly and may be concerned about family involvement. You should be clear on your own position before discussions begin.
If a sale depends on you or another family member staying on for a period, that will usually be reflected in the legal documents. If you plan to step away entirely, buyers will want to understand how the business will cope without you.
Contracts and Relationships
Small family businesses often rely on long-standing customer and supplier relationships. These may feel secure, but buyers tend to take a cautious view.
Contracts are reviewed to check duration, termination rights, and restrictions on assignment or change of control. If relationships are based on trust rather than paperwork, buyers may worry about what happens after the sale.
Property and Premises
Property can play a sensitive role in family businesses. Sometimes premises are owned personally by a family member rather than the business. Sometimes they are shared with other family activities. Buyers will want to know what is included in the sale and what is not. If the business occupies property under an informal arrangement, that usually needs attention before completion.
Tax and Estate Planning Considerations
Selling a family business often has wider implications beyond the immediate transaction. Tax planning, succession planning, and how sale proceeds are shared within the family can all come into play. While accountants usually lead on tax, legal advice helps align the sale structure with wider family objectives. Leaving these conversations too late can create tension or delay.
Managing Family Expectations
One issue we often see is differing expectations within the family. Some family members may want a clean exit, but others may hope for a higher price or ongoing involvement. These differences can surface during negotiations and complicate the process. This is why we always advise seeking legal advice to help manage those expectations and keep the transaction focused.
Due Diligence in Family Business Sales
Buyers will carry out due diligence, just as they would in any other sale. In family businesses, this often highlights gaps rather than wrongdoing.
There might be missing documents, informal arrangements, or historic decisions, which all come to light in the cold light of due diligence. If you want to maintain trust and momentum, then it’s always best to just be open and organised.
Keeping The Process Practical
You don’t need a perfect business to sell it, but you do need to understand the issues (if there are any). Preparing early, documenting key arrangements, and taking advice before negotiations begin often leads to a smoother sale. It also helps protect family relationships, which can matter just as much as the deal itself.
How JPP Law Can Help
JPP Law advises family-owned businesses across England and Wales on business sales and exits.
We understand the additional sensitivities that come with selling a small family business. Our role is to guide you through the legal process while keeping matters moving. If you are considering selling a family business and want clear advice on the legal aspects, book a call with our team today.
