Legal fees when you sell a business: what drives the cost

What the legal work covers

Sellers often assume the solicitor's job is drafting the sale agreement. On a seller's side it rarely is: the buyer's solicitors produce the first draft of almost every document, and the seller's work is responding to them.

The real content is the heads of terms, which set the commercial shape and are worth more attention than they usually get; replying to due diligence, which is a long list of questions about every part of the business; negotiating the warranties and indemnities, which is where the seller's risk after completion is decided; preparing the disclosure letter, which is the seller's main protection against those warranties; and completion itself, with the board minutes, stock transfer forms, resignations and filings.

The disclosure letter is the part outsiders underestimate. A warranty says something is true; a disclosure says where it is not. Every disclosure that is made properly removes a claim the buyer could otherwise bring, and building it takes careful work with the seller across the whole business.

Share sale or asset sale

On a share sale the buyer acquires the company itself, with everything in it: contracts, employees, property leases, liabilities and history. One transaction moves the lot, which usually means fewer moving parts and lower legal fees. In exchange the buyer takes on the company's past, so it does deeper due diligence and pushes harder on warranties and indemnities.

On an asset sale the buyer picks what it wants. Each asset has to be transferred on its own terms: contracts need assignment or novation, which may need the counterparty's consent; property needs a transfer or a licence to assign from the landlord; employees transfer automatically under TUPE, with information and consultation obligations attached. More documents, more third parties, more hours.

The choice is usually driven by tax and by the buyer's appetite for historic risk, and it is a conversation for the seller's accountant and solicitor together. It has a direct effect on the legal cost, and a seller comparing quotes should be sure they are comparing the same structure.

The six things that move the fee

The deal structure. All cash on completion is the cheapest outcome to document. Deferred consideration adds security arrangements. An earn-out adds a great deal: the accounting definitions, the protections against the buyer running the business in a way that suppresses the earn-out, and the dispute mechanism all have to be drafted and negotiated.

How many sellers there are. One shareholder is straightforward. Five shareholders with different tax positions, different roles in the business and different views on the price multiply the work, and somebody has to manage the disagreements.

The state of the paperwork. Missing share certificates, an unexecuted shareholders' agreement, contracts that were never signed, employees with no written terms, a lease that expired years ago and has run on. Every gap turns into a due diligence enquiry, a disclosure, and often a piece of remedial work before completion.

Property. A freehold or a lease pulls in a separate discipline. Leases need the landlord's consent, which runs on the landlord's timetable.

Regulation. A regulated business needs change of control approval, and the sale cannot complete until it is given. Data protection, licensing and sector rules each add work.

The buyer's solicitors. A proportionate first draft produces a proportionate negotiation. An aggressive one, with warranties running to forty pages on a small transaction, costs the seller money whatever happens next. This is the single biggest variable and it is outside the seller's control once a buyer is chosen.

How firms charge

Four structures are common and they behave differently.

Fixed fee for a defined scope gives certainty and depends on the scope being honest. Ask what happens when the buyer changes the structure halfway through, because that is when a fixed fee turns into a variation.

Capped fee is hourly with a ceiling: you pay for what is used and know the worst case.

Hourly is the traditional model. Ask for an estimate with the assumptions written down, and for a warning when a defined proportion of the estimate is reached.

Abort fee arrangements matter more than sellers expect. Transactions fall over, and a seller who has paid in full for a deal that died is in a poor position to run the next one. Agree at the outset what is payable if the buyer walks away.

Under the SRA Transparency Rules, a firm has to publish prices for certain areas of work. Business sales are not one of them, so the figure comes from a written quote against your facts. Ours is agreed in writing before any work starts, and it is on the pricing page.

The costs sellers forget

Corporate finance or broker fees, usually a percentage of the price and often the largest single cost.

Accountancy: tax structuring, completion accounts and, on an earn-out, the work of agreeing the figures afterwards.

Landlord's costs on a licence to assign, which the tenant normally pays whatever the answer is.

Warranty and indemnity insurance where the deal uses it, with its own premium and underwriting process.

Your own time. On a small transaction the owner is the main source of every answer in due diligence, and that happens while the business still has to perform, because a drop in performance before completion invites a price renegotiation.

What you can do to keep it down

Sort the paperwork before the business goes to market. Statutory registers written up, share certificates located, contracts signed, employment terms issued, the lease reviewed. Every item found and fixed in advance is one that does not become an enquiry, a disclosure and a delay later.

Spend money on the heads of terms. A day of proper attention there settles the structure, the warranty position in principle, exclusivity and what happens on an abort. Vague heads produce weeks of argument at full rate.

Answer due diligence in structured batches with the documents attached. Drip-feeding answers over six weeks costs more than sending them in three.

Keep one person on the seller's side in charge of the process, and route everything through them. Where four shareholders each brief the solicitor separately, the fee reflects it.

Ask for the estimate to be broken down by stage, and ask what each stage assumes. An estimate without assumptions is a number that cannot be held to.

Where your accountant fits

The accountant and the solicitor are doing different halves of the same job, and the sale goes better when they talk to each other directly.

The accountant owns the tax structuring, whether the disposal qualifies for the reliefs available, the completion accounts mechanism, and the working capital position. The solicitor owns the documents that make those things happen and the risk allocation between the parties.

The costly failures happen in the gap: a completion accounts mechanism drafted without the accountant reading it, or a tax covenant negotiated without anybody checking what the company's actual tax position is.

The work that comes after completion

Sellers budget for the work up to completion and are surprised by what follows it, so it is worth knowing before the fee is agreed.

Completion accounts. Where the price adjusts for cash, debt and working capital at completion, those accounts are prepared afterwards, reviewed by the other side and frequently disputed. The accountants lead it and the solicitors are involved wherever the mechanism is argued about.

The warranty period. Warranties are usually given for a period after completion, commonly one to two years for general warranties and longer for tax. During that window a buyer can bring a claim, and responding to one is work nobody has budgeted for. A well-made disclosure letter is what stops most of them.

Retentions and escrow. Where part of the price is held back, releasing it at the end of the period sometimes needs correspondence and sometimes needs a dispute resolved.

The earn-out period. If there is one, it runs for one to three years and the seller has to monitor whether the conditions are being met and whether the buyer is complying with the protections negotiated. This is the most common source of post-completion litigation in owner-managed sales.

Filings and tidying. Stock transfer forms stamped, the register of members written up, confirmation statement and PSC register updated, resignations filed. Small work, and it has to be done properly because the buyer's next purchaser will look at it.

Ask whether the quote covers any of this. Many do not, which is a legitimate way to price it, and the start of a transaction is the time to find out.

When to instruct

Earlier than most sellers do. By the time heads of terms are signed, the commercial shape is largely set and changing it costs goodwill with the buyer.

Instructing before the business is marketed produces a short piece of preparatory work: a review of the company's paperwork, a list of what needs fixing, and a view on the structure. That is inexpensive and it shortens everything that follows.

A seller who instructs at the heads of terms stage is in good time. A seller who instructs when the share purchase agreement lands is negotiating from behind.

Frequently asked questions

How much do solicitors charge to sell a business?

It depends on the structure and the state of the paperwork, so a meaningful figure comes from a written quote against your facts, and a published range would tell you nothing. The biggest variables are whether it is a share sale or an asset sale, how many sellers there are, whether the price is all cash or includes an earn-out, whether property or regulatory consent is involved, and how proportionate the buyer's first draft is. Our fee is agreed in writing before any work starts.

Is a share sale cheaper than an asset sale?

Usually yes in legal fees, because one transaction moves the whole company, while an asset sale transfers each asset individually. An asset sale needs contracts assigned or novated, often with third party consent, property dealt with separately, and TUPE information and consultation for the employees. The choice is normally driven by tax and by how much historic risk the buyer will accept, so decide it with your accountant and solicitor together.

What is a disclosure letter and why does it matter?

The warranties in the sale agreement are statements that things about the business are true. The disclosure letter is where you set out the places they are not. A properly made disclosure removes a claim the buyer could otherwise bring against you after completion, so it is the seller's main protection. Building it takes real work across the whole business, and it is one of the larger parts of the seller's legal spend.

What happens to the fee if the deal falls through?

That depends on what you agreed at the start, which is why it is worth settling before instructing. Transactions do fail, often late, and a seller who has paid in full for a deal that died is poorly placed to run the next one. Ask specifically what is payable on an abort at each stage, and get the answer in the engagement letter before you instruct.

When should I involve a solicitor?

Before the business goes to market if you can, and no later than the heads of terms. Early involvement buys a review of the company's paperwork and a list of what needs fixing, which shortens due diligence and reduces the fee. By the time the share purchase agreement arrives, the commercial shape is set and changing it costs goodwill with the buyer as well as money.

Does an earn-out make it more expensive?

Yes, and it is usually the single largest structural driver. An earn-out needs the accounting definitions drafted precisely, protections so the buyer cannot run the business in a way that suppresses your payment, a mechanism for resolving disputes about the figures, and often continued employment terms for you. Each of those is negotiated. All cash on completion is by some distance the cheapest structure to document.

Sources & further reading

• Companies Act 2006
• GOV.UK: TUPE — transfers of undertakings
• SRA Transparency Rules
• GOV.UK: Business Asset Disposal Relief

This article is general information, not legal advice. The law changes and depends on your circumstances — always take advice on your specific situation before acting. Last reviewed 21 September 2026. AD Solicitors Limited is a recognised body regulated by the SRA (no. 8011228).