Can I gift or sell my Sole Proprietorship to my wife?

Question

I have an sp that had 8k in sales last year. I want to gift it to my wife so I am no longer receiving any income (so far it’s just been a loss). How do I do this and can she just register as a LLC once I gift to her?

James L. Arrasmith · Answer

You can transfer your sole proprietorship to your wife, but technically speaking, it's not the business entity itself you're transferring—it's the assets, operations, and goodwill. Since a sole proprietorship isn't legally separate from you as the owner, what you're really doing is giving or selling the business components to your wife, who will then establish her own business. 
 
To accomplish this transfer, you'll need to create a detailed inventory of all business assets, develop a bill of sale or gift document, transfer any permits or licenses that are transferable, notify clients and suppliers about the ownership change, and close your business tax accounts. Your wife would need to establish her own business identity by registering for necessary permits, obtaining her own tax ID, and setting up new business accounts under her name. 
 
Once the transfer is complete, your wife is free to register the business as an LLC if she wishes—this would actually be a good move since it provides better liability protection than a sole proprietorship. Just keep in mind that there might be tax considerations for this transfer, especially if the business assets have significant value. Consulting with a tax professional would help you understand potential gift tax implications or whether structuring this as a sale might be more advantageous in your specific circumstances.

Q: Can I gift or sell my Sole Proprietorship to my wife?