Selling a sole proprietorship – What to consider?

What is a sole proprietorship?

A sole proprietorship is a company that was founded by a single, natural person. As a rule, the company is run under the name of this person. One speaks of a sole proprietorship if the entrepreneur is a registered merchant within the meaning of the German Commercial Code (HGB). In this case, the abbreviation “e.K.” is used.

The sole proprietorship is registered with the tax office and thus receives its tax number. If the annual turnover reaches 250,000 euros, an entry must be made in the commercial register. The owner is responsible for the business decisions as well as for the financial obligations. Thus, he or she is also personally liable for all liabilities of the company.

Legal peculiarities of the sale of a sole proprietorship

The sale of a sole proprietorship can only take place under certain general conditions, as the company and the owner or proprietor are legally inseparable. This legal connection may require special considerations, for example regarding the transfer of assets and liabilities.

In principle, the sale of a sole proprietorship is only possible as an asset deal. This means that the assets are transferred to the buyer. The share deal, on the other hand, represents the sale of company shares, which do not exist in the case of a sole proprietorship.

Purchase objects of a sole proprietorship

When a sole proprietorship is transferred, various tangible and/or intangible assets, so-called assets, are sold. These assets should be defined in detail. At best, you also list the assets which are not part of the contract. Possible purchase items include:

• Assets, such as inventory, machinery, buildings, or other physical assets
• Customer relationships, supplier contracts, and corporate reputation
• Trademarks and intellectual property, if applicable

Preparation and planning: valuable tips at a glance

Preparation and proper planning are the be-all and end-all for the successful sale of a company. In particular, it is also an emotional process in which it is important to place your life’s work in good hands. Keep the following steps in mind:

1. valuation
2. financial documents
3. relationships
4. buyer search
5. contract negotiations

Valuation:

An accurate valuation of your business is critical to setting the right selling price.

Financial documents:

All financial documents should be complete to gain the confidence of a potential buyer.

Relationships:

It makes sense to maintain your customer and, if applicable, supplier relationships and keep them informed of the divestiture process at the appropriate time.

Buyer search:

When looking for potential investors, your focus should not only be on achieving the highest possible purchase price, but also on finding a suitable partner.

Contract negotiations:

Contract negotiations should be well prepared. Rely on legal support.

Conclusion

Planning and executing the sale of a sole proprietorship requires diligence and time. A well-organized sale process can maximize the value of your business and ensure that your company ends up in good hands. It is a complex transaction that requires a great deal of expertise. At best, rely on professional support.

Do you need advice on the sale of your sole proprietorship?

At Conpair AG, we have many years of experience when it comes to selling companies. There are some special features that we always keep in mind thanks to our extensive know-how and broad network of experts. Take advantage of our advice. We would be happy to support you in your project. Arrange your personal consultation appointment now.