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Business Transfer Agreements – sole trader to limited company

February 2014
Changing business vehicle – how would you transfer your business assets?

Many businesses will during their lifetime, change the trading vehicle through which they operate. The most common change being from a sole trader to a limited company. This change will usually require an agreement to document the transfer of the assets and liabilities from the sole trader to the limited company, as well as considering what assets should be excluded from the transfer. With this in mind, we have created two brand new, short and easy to use Business Transfer Agreements, one designed for transferring assets generally and the other specifically designed for a web based business that includes an assignment of web based IP rights and software.

Many entrepreneurs starting out on a new business venture often choose to trade as sole traders. Operating as a sole trader is an easy, less regulated and the most informal way for any business to start life. However many businesses will reach a stage, (both physically and financially), where on balance it is more beneficial for them to operate through the mechanism of a limited company.

As well as considering the formation mechanics of setting up as a new company, a sole trader will also need to consider what assets and liabilities will be transferred to the new business vehicle. This could cover the goodwill of the business, its physical assets, stock, contracts, premises, IT, IP and software amongst other things.

Our new general business transfer agreement covers the most common assets that will usually need to be transferred from the sole trader to the limited company in a business that deals primarily in physical stock, whilst our web based business transfer agreement has been specifically drafted to cover the transfer of assets that a web based business, is likely to have and includes an assignment of software and web based IP rights. This could cover web developers, e-commerce businesses or any business that primarily conducts its business online. The consideration for the transfer of assets in both agreements is the issue of shares in the new limited company.

These business transfer agreements have been specifically drafted to cover a change in business vehicle and will help to ensure that by documenting the transfer any future misunderstanding or dispute as to the ownership or transfer of assets is avoided. The documents have been drafted with both a new entrepreneur as well as a more experienced business executive in mind.

The contents of this Newsletter are for reference purposes only and do not constitute legal advice. Independent legal advice should be sought in relation to any specific legal matter.

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