Buying a shop

 

The EM&F Group, one of the country's largest privately owned Business Transfer Agency Groups offer advice on buying a business Click here to visit their website.

 

1. How do I go about finding Businesses to view
2. What are the key steps to take in viewing a prospective Business?
3. Assess the potential of the Business
4. Consider the total level of investment that might be needed to buy the Business
5. Do I need to raise additional funds?
6. What do I do once I have become seriously interested in a Business?
7. What action is needed to complete the purchase?
8. Completion
9. Choose the right Business Structure

 

 

How do I go about finding Businesses to view? 

You will save yourself a lot of time and energy by:

 

• Reading the trade press and Dalton’s Weekly where most reputable business agents advertise.
• Looking in the Yellow Pages (Business Transfer Agents).

 

A good agent will establish: the geographical area and the type of business you are interested in buying, your accommodation requirements (if any), the finance options available to you. He will then be in a position to supply you with details relevant to your specific areas of interests, avoiding wasted time and expense on unsuitable propositions.

 

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What are the key steps to take in viewing a prospective Business?

Make an appointment through the agent Prepare in advance of your visit the questions you would like answered Be discreet – the vendor may not want his staff or customers to be aware that he is in the market to sell his business Take notes during your visit (or immediately afterwards). Summarise your general impressions and feelings after you leave.

• Communicate your conclusions to your agent, even if they are negative.

• It will enable them to obtain a clearer picture of your requirements

 

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Assess the potential of the Business

 

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Consider the total level of investment that might be needed to buy the Business

Enough capital for the following: 

• To buy a leasehold or freehold premises
• To buy the going concern and its stock
• To cover all professional costs incurred including: solicitors, accountants and survey/valuation costs
• Sufficient working capital (enough money to live on, cover my initial overheads and replace stock as I build the business)

 

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Do I need to raise additional funds? 

There are several fund generating options: Re-mortgaging my house Selling my house Obtaining a bank, building society or finance house mortgage/loan A good business agent should be in a position to provide you with sound financial advice and access to good sources of funds.

 

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What do I do once I have become seriously interested in a Business?

• Request accounting information and once received consult your accountant who will then be able to advise you on the advantages and disadvantages of buying the business from a financial viewpoint

• Make a formal offer through the business agent first by telephone and then in writing.

 

Head your letter ‘Subject to contract’. Make sure you include that phrase in all subsequent written communications.

 

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What action is needed to complete the purchase? 

Once you have come to an agreement to purchase you will need to: 

• Retain a reputable firm of commercial solicitors to assess the legal implications. They will:

• conduct a search at the local planning office and the land registry office

• check all relevant licences, consents and the like

• Retain a reputable commercial surveyor to conduct a survey and valuation.

• If a mortgage or loan is involved the finance house, building society, or bank will insist upon their own full survey and valuation at your expense

• Providing that you still intend to buy, we would now recommend that the vendor and yourself undertake to share the cost of an independent stock valuation.

• A good agent will be able to arrange this for you.

 

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Completion

Prior to completing you should (if possible) negotiate an overlap period with the vendor. This should be long enough to enable you to become fully familiar with:   The business Its practices Its customers and suppliers

 

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Choose the right Business Structure 

Before you begin trading you’ll need to decide which legal structure will best suit your business.

 

They are: 

• Sole trader

• Partnership

• Limited liability company

• Limited company

• Co-operative

 

The most suitable structure for you will depend on your personal circumstances and the project you have in mind. Your decision will affect the way you are taxed, how much tax and National Insurance you pay whether you are personally liable for the debts of the business and many other matters.

 

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Sole Trader 

This is the simplest business structure and will suit many small businesses, particularly in the early years. There are no formalities other than to notify the Inland Revenue, the Department of Social Security and, if appropriate, Customs & Excise (VAT) that you have started to trade.

 

Each year your tax office will send you a tax return for completion. This asks for details from your business accounts and for a calculation of the tax on your profits. To deal with this, and any points raised by the tax office about your business, you will probably need the help of an accountant.

 

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Partnership 

The advantage of forming a partnership is that it brings a broader range of skills to the business and it enables you to share the work and responsibilities of running it. However, there are legal implications of being in partnership so you should have a partnership agreement prepared by a suitably qualified person, specifying how the business is to be run, how profits and losses are to be shared and what happens when the partnership is dissolved.

One very important point to remember is that every partner is liable for the full amount of all partnership debts.

 

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Limited Liability company

A limited liability partnership is the same as a partnership except that, like a limited company, it has the advantage of limited liability. However, as with a limited company, there is more formality and regulation involved in setting up and operating as a limited liability partnership.

 

Generally, very large partnerships might find that this could be a suitable business structure for them.

 

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Limited company 

Forming a limited company is a way of separating your business and private affairs, as you will not normally be liable for the company’s debts. It is often easier to raise money if your business is incorporated (although you may have to give personal guarantees) and a company structure can make a business appear more substantial.

 

As more formalities are involved in forming and operating a limited company, you will probably need the assistance of an accountant or company formation agent to ensure that everything is done properly and on time.

 

You will normally be a shareholder and director of your company. Companies House produces a very comprehensive pack of guidance notes that set out the procedures which have to be followed and the responsibilities of the officers of the company.

 

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Co-operative 

You and your colleagues may want to run the business as a co-operative. A co-operative is a business that is owned and run by its workforce.

 

This is a type of business that needs specialist advice and assistance so if you decide on this type of business structure; contact the Co-operative Union or the Industrial Common Ownership Movement.