Selling a Sole Proprietorship: Advantages, Drawbacks and Complications

If you run your business as a sole proprietorship — without a separate ApS or A/S behind it — there are a number of fundamental differences that set a sale apart from what you might picture based on stories about selling companies. Here's what you should know before you start.

What is a sole proprietorship, legally speaking?

A sole proprietorship isn't a separate legal entity, distinct from you as the owner — in the eyes of the law, the business and you are the same "legal entity". It's the simplest and cheapest business form to set up: no capital requirement, no requirement for an accountant or extended annual report below certain size thresholds. In return, you're personally and unlimitedly liable for everything the business does — with your entire personal wealth, including your home and savings, if the business can't cover its own obligations.

The most important consequence for a sale: there are no "shares" to sell

Because the sole proprietorship isn't a separate legal entity, there are no shares you can transfer. Selling a sole proprietorship is therefore always an asset purchase — you sell the individual assets (inventory, equipment, customer relationships, goodwill) individually or together, not the business "as such". This is a crucial point to understand before comparing your situation to an acquaintance who's sold an ApS or A/S.

Complication: contracts don't automatically come along

Because there's no change of ownership of a legal entity — only a transfer of individual assets — customer, supplier and lease contracts don't automatically transfer to the buyer. Each agreement generally needs to be reviewed, and the other party must consent to the agreement being transferred to the new owner (a so-called novation). If you have many ongoing agreements, this can become a considerably bigger task than many sellers expect.

Complication: the business registration number generally doesn't come along

Generally, a sole proprietorship's business registration number (CVR) doesn't automatically continue with a new owner — the business is, after all, personally tied to you. If you sell the whole business, you'll typically need to deregister your CVR number, while the buyer registers their own, new one for the continued operations. In practice, this can mean a short period where certain agreements, approvals or permits need to be re-established under the new CVR number.

Tax consequences of a sale

If you sell the assets in your sole proprietorship, the profit — including any recaptured depreciation on equipment — is taxed as personal income, regardless of whether you choose to withdraw the money immediately or not. That's a different tax reality than selling shares in a company, where the gain is instead taxed under the Share Gains Tax Act. Have you been regularly withdrawing money from the business ahead of the sale? Read more about the rules in our article on how to withdraw money from a sole proprietorship.

Advantages of selling a sole proprietorship

• Simple structure: No ownership agreements, board, or multiple owners to negotiate with — you make the decision alone.
• Flexibility in what's sold: You can more freely choose to sell selected assets or parts of the business, without having to address a whole legal entity.
• No corporate formalities: No general meeting, no changes to articles of association, no registration of a new ownership group with the Danish Business Authority for the entity itself — because there's no company.

Drawbacks and pitfalls

• Personal liability until the deal is fully completed: You're personally liable for the business's obligations until they're genuinely settled or taken over by the buyer — make sure you have clear agreements on who's liable for what after the takeover date.
• More administrative work in the transfer itself: The lack of automatic continuity means more practical work transferring agreements, permits and customer relationships than in a company purchase.
• No separation between the business and you personally in the negotiation: The buyer effectively negotiates everything with you personally, which can make the process more emotionally charged — see our article on the emotional side of selling what you've built.

Should you convert the business into a company before selling?

For some sellers, it can make sense to convert the sole proprietorship into an ApS before starting a sale process — partly because it opens up a company sale with the tax and structural advantages that can involve. This is a decision that should be made well in advance, and with an accountant or lawyer involved, since a conversion has its own tax consequences and conditions.

Frequently asked questions

Can I sell "shares" in my sole proprietorship?

No. A sole proprietorship has no shares — a sale always happens as an asset purchase of the individual parts of the business.

Does the buyer automatically take over my contracts with customers and suppliers?

No, generally each agreement needs to be transferred with the other party's consent. That's one of the most common reasons selling a sole proprietorship takes longer than expected.

Do I need to deregister my business registration number when selling?

If you sell the whole business, you'll typically need to deregister your own CVR number while the buyer sets up a new one. If you only sell part of the business, your CVR number can continue for the remaining operations.

Considering selling your sole proprietorship? Book a no-obligation call, or read our comparison of a sole proprietorship, ApS and A/S when selling.