Changing business ownership for sole traders

According to recent research by Xero, there were 1.5 million sole traders in Australia as of June 30, 2020. There’s clearly something very Australian about operating as a sole trader, and it’s a popular type of business ownership for many entrepreneurial Australians. In fact, sole trader ownership is one of the most popular business ownership structures among Australian small business owners.

Sole trader ownership is all about striking out on your own, doing things your own way, creating something great from very small beginnings, and becoming the master of your own destiny as a self-made man or woman. It’s the Australian way, and it’s one of the most popular business ownership structures and types of business ownership in the country.

As a sole trader there may come a time when you want to sell your business, or transfer ownership to your family members, such as your children, if you run a family-owned business. Perhaps you want to settle down and enjoy the spoils of your toils. Maybe you have another business idea in mind that you want to try your hand at. Or maybe you have entirely different motivations.

Whatever your reasons, if you decide to sell your sole trader business, it’s important to remember that selling a business can take some time and it likely won’t happen overnight. As everyone’s circumstances are unique to them it is probably best to seek the advice of a professional like an accountant or a business advisor to assist you with your sale. However, before you do it may be useful to understand the following actions in selling a sole trader business to help you avoid any surprises and ensure a smooth sale and change of business ownership from yourself to the new owner.

Close your business

In the context of transferring ownership of your business, closing your business means paying any outstanding invoices (including building utilities and maintenance, unpaid business activity statements, final tax returns, employee entitlements, and instalment notices.

Inform key stakeholders and government organisations

It’s important that you keep all key stakeholders up to date about the sale of your business, including contracted staff, suppliers, as well as your external partners, such as legal advisors and tax accountants.

You will also need to update the relevant government bodies, including the Australian Taxation Office, the Australian Business Register, and the Australian Securities & Investments Commission within 28 days.

Transfer licences, permits, and lease agreements

For the new owner to be able to successfully acquire and operate your sole trader business, all lease agreements, permits and licences may need to be transferred to them. These transfers can take time to process, so it’s a good idea to process these transfers sooner rather than later. As part of this step, you may discuss the existing sole trader insurance you have in place to cover the business.

Business records and assets

There are important company assets that the new owner of your sole trader business will need to run the business. As part of the transition to the new owner, make sure that you provide the new business owner with:

• Business records (employee, financial and customer records);
• Intellectual property; and
• Marketing assets.

The final step

The final step in transferring sole trader ownership of your business is an important step. Once your sole trader business has officially been transferred to the new owner, cancel your ABN. Your existing ABN is not transferrable to the new owner.

Does the sole trader business ownership structure sound like the right path for you? If you are considering purchasing an existing sole trader business, you’ll want to build your new business on a strong foundation. And a key part of doing that is protecting your new sole trader business by securing your sole trader insurance*.

Compare business insurance quotes for your business, or give us a call 1300 920 864 to find out how quick and easy it can be to purchase sole trader insurance.