You may wish to change company ownership because your business is expanding and you want to bring a business partner on board, transfer your business to another or even sell it.
In this article we’ll go over the steps you need to take to change company ownership.
How To Change Company Ownership
- Finalise that paperwork!
a. This includes paying anything you have outstanding. This could be to employees, or paying outstanding bills. You’ll also need to finish up any reporting obligations you have that come with running a company, for instance submitting a business activity statement.
- Notify and update business changes
a. You will need to let shareholders (if applicable) and other stakeholders know of the change in ownership. This includes updating relevant organisations of these changes, such as the ATO, ASIC, etc.
- Transfer licences, permits, leases, records and assets (includes business records, intellectual property, and marketing material) to the new owner.
- Cancel your business name or transfer it, and cancel your ABN.
- Lastly, in the case of taking new business partners on, you’ll need to update your paperwork to reflect this.
Can You Transfer Ownership Of A Sole Proprietorship?
While sole proprietorship is not a company structure, this is a question we get quite a lot. Being a sole proprietor, otherwise known as sole trader, means there is no separate entity – you are personally responsible for all the joys, debts and liabilities of the business. This means you can’t transfer ownership of a sole proprietorship.
You can however change the structure to another structure, say company structure and then transfer ownership of that company.
Or, if you don’t want to change to a company structure, another option is to just sell your business’ assets.
Changing From Sole Trader To Limited Company
A lot of businesses change their structure from sole trader to a company for a heap of reasons – their business has grown or they want to prepare for business expansion, they want to separate liability from their person, they can better protect the business’ assets in a company, tax reasons, they want to raise capital, or if they decide they want to take on a business partner or partners.
Preparation Before You Register A Company
First up you should decide what type of company you want to change to. This will depend on;
- whether your business is a charity or not,
- whether it has a special purpose,
- the size or projected size of your business,
- whether you want a straightforward proprietary limited company versus a public company,
- or whether you want to make it more complex and have a holding company/companies.
As you can see, the list goes on!
A legal consultation with a corporate lawyer comes in handy at this stage – before you set up your company and while you’re thinking about structure. Taking the time to set up the most appropriate company type for your business will save you headaches down the track.
You’ll also need to decide on; who the director(s) and secretary(ies) will be, comprehend your new legal obligations as a director and/or shareholder, understand how to keep up with compliance now that you have a company and decide on a company name. We’ve written more about how to register a company and what you’ll need here.
Registering Your Company
Once this is all done, to change from a sole trader to a company, you need to;
- Register a company and get the right documentation in place (eg. a Shareholders Agreement)
- Cancel your old ABN and get a new ABN, and once registered you will receive an ACN (Australian Company Number)
- Transfer your assets, licences, intellectual property, trademarks and leases if applicable.
Here at Sprintlaw, we’ve seen it all! No matter what type of business you are, our consultations can make the process much easier. We can also help you set up your new company, and even offer company secretarial services.
Don’t hesitate to contact our friendly team on firstname.lastname@example.org or give us a call on 1800 730 617 for a free, no obligation chat.
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