Selling a Sole Proprietorship: What Owners and One-Person Businesses Need to Know

You always sell a sole proprietorship as an asset deal — there are no company shares that could change hands, only the business itself and its assets.

That makes selling a sole proprietorship, and especially a one-person business (in Austria: EPU), a case of its own. The biggest question here is not legal but economic: what remains of the business once the owner leaves?

Why the sale differs from a GmbH

With a GmbH, the owner can sell their shares and the company continues unchanged as a legal entity. A sole proprietorship has no such shell. What is sold is the business as a whole — the individual assets, contracts and goodwill are transferred.

This means selling a sole proprietorship is always an asset deal, with all its consequences: contracts must be transferred individually, often with the counterparty's consent, and the liability and tax questions of the asset deal apply accordingly.

The biggest hurdle: dependence on the owner

One-person businesses make up a large part of the Austrian economy — according to the Austrian Chamber of Commerce (WKO), more than half of its members. Their very strength is their weakness when it comes to selling: the business hangs on one person.

If the owner embodies the customer relationships, the know-how and the good name, every buyer rightly asks: what am I actually buying once this person leaves? A sole proprietorship whose value rests entirely on the owner is hard to sell — or only at a steep discount.

The good news: this can be worked on. Documented processes, a transferable customer base, written instead of verbal agreements and — where possible — a second person who carries responsibility make the difference between sellable and unsellable.

What creates the value

The value of a sole proprietorship does not come from machinery and inventory alone. The larger part is usually the goodwill: a loyal customer base, recurring orders, an established brand, a working network.

That is precisely why a realistic valuation is the first step, not the listing. How to assess the value of a business, and why the price is ultimately set in the negotiation, you can read in "What is my company worth?".

Contracts, employees, the commercial register

Because everything transfers individually, care is required. Customer and supplier contracts, lease and leasing agreements, licences and insurance policies are transferred — many of them only with the counterparty's consent. Trade licences attach to the person and must be obtained anew by the buyer.

If the sole proprietorship has employees, there is usually a transfer of business: the employment relationships pass to the acquirer with all rights and obligations. Selective takeovers are barely possible.

Tax: a point that belongs on the table early

Tax is particularly sensitive for a sole proprietorship and belongs in the hands of your tax adviser. For context: in the year of handover, the owner is taxed on both the ongoing annual profit and the capital gain — which can lead to a considerable income-tax burden. For certain situations, for instance from a certain age or in the event of incapacity to work, the law provides relief. In addition, the sale price is in principle subject to 20 percent value-added tax, which the buyer can reclaim as input tax.

This is context, not tax advice. But the lesson is clear: whether a sale is attractive on a net basis is not decided by the gross figure — the tax question should be involved from the outset.

The right lead time

Selling a sole proprietorship begins not with the buyer but with preparation — and that takes time. Those who reduce dependence on their own name over two to three years, document cleanly and know the valuation, sell from an entirely different position. For when the right moment is, see "When is the right time for succession or a sale?"; the situation in Austria is set out in "Business succession in Austria".

Selling a company is the most important transaction of an entrepreneur's life. Have it guided independently and discreetly — IGCP Capital Partners. → igcp.at

Frequently Asked Questions

How is a sole proprietorship sold?

Always as an asset deal: since there are no company shares, the individual assets, contracts and goodwill are transferred. Contracts do not pass automatically but must be transferred individually and often with the counterparty's consent.

What is a sole proprietorship worth in a sale?

The value comes less from machinery and inventory than from goodwill: customer base, recurring revenue, brand and network. What matters is how transferable that value is — the less it depends on the owner, the higher the achievable price.

Can I sell a one-person business at all?

Yes, but its sellability depends heavily on how much the business hangs on you personally. The more transferable customer relationships, processes and know-how are, the more likely you are to find a buyer at a fair price. Where the value lies entirely in the person, a sale is difficult — preparation over several years helps here.

What taxes arise when selling a sole proprietorship?

In the year of handover, the ongoing profit and the capital gain are subject to income tax; depending on the situation there are reliefs. In addition, value-added tax generally applies. The actual burden depends on the individual case and should be assessed for tax — this article does not replace tax advice.