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WHAT IS A SOLE TRADER TO LIMITED COMPANY BUSINESS TRANSFER AGREEMENT?

A sole trader to limited company business transfer agreement is an agreement by a sole trader to sell his business to a company he has set up (either on his own or with others).

The agreement will (amongst other things):

  • set-out the rights and obligations of the company and sole trader,
  • identify what assets are being transferred,
  • provide for the assumption of the business’ liabilities by the company,
  • set-out how the price for the assets is to be calculated and paid, and
  • consider and provide for perfection of the transfer regarding certain assets such as debts or intellectual property.

NOTE:Although some of these may seem excessive, it is important to remember that the company is a separate legal entity and that title to the assets may need to be shown in a subsequent sale or for investment or lending purposes. Some issues may be more important if the company is going to have new shareholders or directors in addition to the sole trader.

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