Owning a sole proprietorship is a reflection of you. It can be both your work and your passion, encompassing a large portion of your life and how you live. Selling that business can be a difficult decision but, when the time comes, it’s important to understand the process involved.
The nature of a sole proprietorship
Unlike other business forms, a sole proprietorship cannot be sold as a single entity. The business is not separate from the individual and does not exist without them. Instead, only the business’ assets are sold, so the first step is determining which of those assets you will part with.
Assets and valuation
Debts and obligations generally cannot be sold. Assets, both tangible and intangible, can be sold. Tangible assets include things like inventory, land, buildings and supplies. Intangible assets may consist of brand names, trademarks, copyrights and patents.
Once you have determined the assets you intend to sell, assign them a value and come up with your selling price. This number may change, as the final sale price will depend upon the market and any negotiations which take place with potential buyers.
When you have chosen a buyer and agreed upon a price, you need to prepare a sales agreement. The agreement reduces the terms of the sale to writing and can help prevent disputes between you and the buyer. It should include the assets being sold, the sale price and details such as the intent of the parties. For instance, you may continue to work for the business for a time to smooth the transition.
Have the sales agreement reviewed by a knowledgeable professional to ensure it contains everything it should. Once the sale is complete, you will still be responsible for any outstanding debts or obligations. If there are business accounts in your name, they should be closed along with the sale.