How to Sell a Sole Proprietorship

By Larissa Bodniowycz, J.D.

How to Sell a Sole Proprietorship

By Larissa Bodniowycz, J.D.

You've created a successful a sole proprietorship, and now you want to sell your business. Although you cannot sell your establishment as a whole, you can sell its assets.

Man sitting at a desk signing paperwork

A sole proprietorship can only ever have one owner—hence the word"sole" in the name. The owner generally holds the assets in their name, not in the name of the business entity. Legally, the company and its owner are the same entity. This is true even though your proprietorship operates for business purposes and likely has its own name, because you are still personally responsible for all of the debts and actions.

Assets You Can Sell

The assets you can transfer or sell may consist of physical things, which might include the company's finance, inventory, land, real property, and equipment. They may also consist of intangible entities, such as your all customer information, your business' reputation and goodwill, and intellectual properties that include any trademarks, brand names, copyrights, or patents.

For example, if you are a grocer and own Joe's Grocery Store as a sole proprietorship, you cannot sell Joe's Grocery Store in its entirety. You could, however, sell the store building, the forklifts and other machinery you own, the grocery's food inventory, and your trademark in the name "Joe's Grocery Store" (assuming you own all of these things).

How to Make the Sells

Because a sole proprietorship only consists of one person and does not have its own separate identity, you cannot simply sell or transfer the business itself as you can when you dissolve a limited liability company (LLC). However, because you personally own its assets, you can sell these to another person or entity.

  1. Find out the fair market value of you own, particularly in the case of intangible items such as your intellectual property, customer list, and the goodwill you have built with the public. You may need to enlist the help of a qualified appraiser to do so. Your company' annual earnings will likely figure heavily into this valuation.
  2. If you do not already have a potential buyer in mind, advertise your establishment for sale and/or hire a broker to assist with finding potential buyers.
  3. Once you have a buyer lined up, negotiate the terms of sale. You and the buyer must draft and sign a purchase agreement dictating these terms. You should explicitly dictate each and every thing involved in the sale, as this area can get murky with a sole proprietorship, where there is often a mingling of assets used for both personal and business purposes. The buyer will likely want to conduct their own due diligence in investigating the value of your the company's assets.
  4. After you complete and sign the purchase agreement, you can begin transferring assets to the buyer. The buyer must retitle them in their name.
  5. Dissolve your business' tax identification number and the DBA name registered within your jurisdiction. Close all company accounts opened in your name. You are responsible for any debts you accrued while operating the company, but you can use the proceeds from the sale of your assets to pay back any creditors as needed.

After the Sale

After the sale, the new buyer can set up a separate business structure or use an existing one to receive and utilize these assets. This could take the form of another sole proprietorship or a different entity type, such as a corporation or LLC. The new owner also needs to open business accounts in their own name.

Selling your business may seem daunting, especially when you are the only owner. While it may take some time, following just a handful of steps will allow you to separate yourself from your company entirely. You are now free to go on vacation or start a new venture with your earnings from the sale.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.