Sole proprietorships pose unique issues when they are bought or sold. Sole proprietorships are businesses that are owned by a single individual rather than by an entity such as a corporation or limited liability company.
Most businesses are held and operated by companies rather than by an individual. Entities such as corporations and limited liability companies are created under state law by filing a document with the secretary of state and are treated under state law as a legal person separate from their owner(s). When the business is sold, the buyer’s focus is mostly on the entity: because the business assets and liabilities are contained within the entity, the buyer’s due diligence is focused on the entity’s assets, liabilities, and contractual relationships.