If a business is owned and operated as his own business by an individual without having created a separate legal entity for the business. then he is the sole proprietor.
If he wishes wish to sell or transfer the business to another person, there are some steps to be followed to ensure that the transfer is accomplished in a legal and binding manner.
Before selling or transferring the legal interest in the business, he must know exactly what those interests consist of first, inventory the business.
List out all assets and liabilities/debts, as well as any stock on hand, if applicable.
Execute title transfers or quitclaim deeds if applicable in favor of the new owner. If real property is part of the business, and the property owned is free of any liens or encumbrances, then execute a quitclaim deed to effectuate the transfer. Other property, such as vehicles or machinery, will also need to be transferred into the new owner's name by signing the title over.
Notify the secretary of state of the transfer of ownership if the business was operated under an assumed name or a "doing business as" name.
If a name other than the owner's name is used, most states require the proprietor to file an assumed-name certificate or similar filing. If the new owner plans to use the same name, the secretary of state should be notified.
Small Business > Business Models & Organizational Structure > Sole Proprietorship
How to Transfer Ownership of a Sole Proprietorship
by Renee Booker, studioD
If you own and operate your own business without having created a separate legal entity for the business, then you are a sole proprietor. Because a sole proprietorship does not require you to execute any legal documents to form, it can also be shut down without executing any legal documents. If, however, you wish to sell or transfer the business to another person, there are some steps you should take to ensure that the transfer is accomplished in a legal and binding manner.
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Inventory your business. Before you can sell or transfer your legal interest in the business, you must know exactly what those interests consist of first. List all your assets and debts as well as any stock on hand if applicable.
Create a sales contract if you are selling the business. A contract to sell a sole proprietorship can be as simple, or complicated, as you choose to make it. At its most basic, it needs to list what you are offering to sell to the buyer, the total purchase price and the payment terms. Sample contracts can be found online or at a local stationary store.
Execute title transfers or quitclaim deeds if applicable in favor of the new owner. If real property is part of the business, and you own the property free of any liens or encumbrances, then you may simply execute a quitclaim deed to effectuate the transfer. Other property, such as vehicles or machinery, will also need to be transferred into the new owner's name by signing the title over.
Notify the Registrar of companies about the transfer of ownership if registered with ROC. Although sole proprietorships are not required to file anything to become a legal business entity, it may be required to register the company as per law. If the new owner plans to use the same name, the ROC should be notified.
If your sole proprietorship has significant assets or value, consider consulting with an attorney to prepare the sales contract.
Even if you are simply transferring ownership to a family member without an actual sale, a contract is still a good idea, as the new owner will have an official document showing ownership.
Debts of a sole proprietorship are actually debts of the individual owner and are not transferable to a new owner. If the business has debts that will not be paid in full prior to the transfer, discuss with the creditor whether the new owner may assume the debt before agreeing to the sale or transfer.