Business transfer agreement: incorporation of a sole trader or partnership to a company

About this document

This is a comprehensive agreement for the sale of a business to a company or limited liability partnership (LLP) where the owners of the business being sold and the new company are one and the same.

Most businesses are started by individuals who work under their own name as sole traders. The disadvantage of this business structure is that the owner has personal liability for the mistakes of the business. Placing the business into a company or LLP gives the advantages of limited liability and the opportunity to sell discrete units (shares) of the whole business to raise finance or cash out.

After a period of operation, a business is likely to own property and have contractual relationships. Documenting the transfer of the business to a company by means of a sale provides a record of the transaction for tax purposes and ensures that arrangements with important suppliers and customers are carried over smoothly.

This agreement is suitable for any type of business, whether owned by one or several people.

We include warranties for good measure, although it is unlikely that they will be required as both the seller and the ultimate buyer are the same.

We intend for the deal to be completed on the same day as the payment and title is transferred, not at some future time.

The purchase price is apportioned among the assets so as to simplify tax planning.

In addition to this document, you may need agreements that set out how the company operates. These might include a shareholder agreement, modern articles of association that reflect how your company works, and notices and meeting minutes.

Contents

• Terms of the agreement for sale and list of subject matter of sale
• Allocation of purchase price, when and how it is to be paid
• What happens to complete the transaction
• Dealing with counting and hand over of stocks
• Responsibility for creditors and debtors
• Seller's warranties
• Seller's future activities
• Mediation of a dispute before court action
• Other usual provisions to protect your interest

We also include a set of explanatory guidance notes in plain English at the back of the document. These will help you decide which paragraphs to edit, and how to edit them.