Category Archives: sale of business law

If One Sells a Sole Proprietorship, What is Being Sold?

If one sells a corporation, the shares of stock are what is being sold. If one sells a limited liability company, the membership interest is what is being sold. However, when one sells a sole proprietorship – a business which is not an entity– what exactly is being sold?

Generally speaking, the answer is that the assets are what is being sold. Some of these assets are easy to spot. For example, if the business has inventory; if it has vehicles or real estate, those can be the principal asset being transferred. Other times, especially in regard to a personal services sole proprietorship business (such as a doctor or lawyer’s practice), what is being sold is general intangibles. This can be everything from a copyright or a trademark to a right to collect money. These general intangibles are essentially the beginning and end of the value that of personal services sole proprietorships.

One of the more interesting dillemas is how to set a value on such general intangibles. Normally, this will be the central issue in determining the price for a sole proprietorship that does not have tangible assets.

© 2014 Nissenbaum Law Group, LLC

Does the Consumer Fraud Act Apply to the Sale of an Ongoing Business?

In 539 Absecon Boulevard, LLC., v. Shan Enterprises Ltd P’ship, 406 N.J. Super. 242 (App. Div. 2009), the Appellate Division of the Superior Court of New Jersey was presented with the question of whether the New Jersey Consumer Fraud Act applies to the sale of an ongoing business.

In that case “the defendants . . . owned a variety of commercial properties which they apparently bought and sold for investment purposes.”  Id. There were allegations of fraud and other causes of action relating to the sale by the defendants of an ongoing motel business and the real estate upon which it was situated.

The Appellate Division determined that the Consumer Fraud Act did not apply to the transaction.  The allegations of wrongful conduct pertained solely to the sale of the motel as a business, not with respect to the property on which it was located.  The court gave a number of reasons, the most notable of which was that the “false assurances did not relate to any good, service, or commodity offered to the public for sale.” Id

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© 2012 Nissenbaum Law Group, LLC