Many entrepreneurs want to sell their sole proprietorship one day, but is that actually possible? Before we can give a reasoned answer to this, it is essential to explain some things. The business transfer of a sole proprietorship by a limited liability company, is it possible?
Sole proprietorship
To start with, it is useful to know what a sole proprietorship is. A sole proprietorship is not a legal entity. This means that an entrepreneur works independently, but is also responsible privately as well as business-wise. Both profits and losses affect private life. The entrepreneur is the sole owner of the sole proprietorship, but can employ staff.
BV
BV stands for private limited company. This is indeed a legal form, which limits a director's private liability. You can set up a BV alone or together with others. The capital of the company is divided into shares, which are owned by the shareholders. Together they are responsible for the day-to-day running of the business.
Takeover of sole proprietorship by BV difficult?
The problem is that a sole proprietorship is not a legal entity, but simply a person running a business. Because of this, a BV cannot simply take over a sole proprietorship, because then the owner of the sole proprietorship would actually be selling himself. But this does not mean that the takeover of the sole proprietorship by a BV is impossible. It just needs to be arranged in pieces.
For starters, things like stock, inventory and trade names can be taken over. In practice, often the beneficial facets are taken over and the sole proprietorship - i.e., the entrepreneur - is left behind with the debts. In addition to these, often tangible, assets, there are, of course, contracts and other privacy-sensitive items, such as customer data.
Transfer of contracts and customer data
Contracts in a sole proprietorship are concluded between party A (the sole proprietorship) and party B (the client). If there is a takeover of the sole proprietorship by a BV, then party C (the BV) actually comes around the corner. In case of warranty or problems, party B has to address party A, because they have a contract. Only with the agreement of both parties, party C is entitled to take over the existing contracts. When taking over contracts, the choice is not to take over only the profits, so any debts are added by the buyer.
Customer data is precious and subject to the General Data Protection Regulation (AVG), making this quite difficult to transfer correctly. Although there is very little chance that you will be fined for it, there is only one correct way to proceed: ask customers' permission to transfer their data.
Valuation of sole proprietorship
If you are planning to take over a sole proprietorship, you would do well to conduct a valuation in good time. Call in a specialist who can chart the development of the last few years. Are the revenues hugely dependent on the owner? Then it is not always a good idea to transfer the business, because you will lose an essential part; the owner. Then again, a dropshipping business or an online store can be attractive, as it revolves around sales channels and orders. Often the person behind the business is less important.
For the owner of the sole proprietorship, it is essential that the settlement is properly arranged. In this case, a takeover is seen as the termination of the business, which means there is still a settlement with the Tax Office. The Chamber of Commerce number is cancelled and the VAT number becomes inactive. The tax reserves, hidden reserves and goodwill must be paid under the heading of cessation profit. You can still keep the amount of tax under control by using the cessation deduction.
