Plan Termination of old and new plan establishment

We have a solo-k plan with plan sponsor Y.  Sole-proprietor decided to end his business, Y, this year and establishes a new business Z in the same year.  Sole-proprietor would like to establish a plan for business Z.  Is this ok?  In my gut, I say 'yes',  as an owner of multiple companies can sponsor plans for each company if they want within the regulations.  It is the sole-proprietor that is throwing me.

Is he 100% owner of Z?

If yes don't you have a controlled group in 2017 with Y & Z?

Is there a reason to not have Z adopt as a sponsor of the Y plan?

Yes, there is a control group that would exist for 2017.  Business Y closed its doors in 2017.  They are listed as the sponsor of plan Y.  If Business Y closes, then I would have thought that Y  can no longer sponsor a plan. 

Why not have Z adopt in 2017 and Y adopt an amendment no longer being a sponsor as of 1/1/2018.

You have both sponsoring one plan in 2017 and Z takes over for 2018?

To me this seems the simplest solution and I like simplicity. But there may be reason why you don't want to do that.

The IRS considers sole proprietorships to go on and on and on and on..... until death. Your client should check with an accountant who will set him/her straight on the fact that his/her "business" was doing one thing at the beginning of the year and something else at the end of the year, but as far as the IRS is concerned it is the same business. Anything borne of the fruit that there are distinct businesses is poisonous.  Act accordingly.