@Clinton is being (IMO) somewhat overly harsh, but then sometime folks do need a wake-up call!
do I simply setup a new limited company on companies house and set the trading under to "Said shop name" and address?
Am I allowed to do this? would this be the correct way? Or how would this normally work in any circumstance, if you were to buy a shop front business and wanted to keep the name and just carry on as business as usual if it is a limited company which also is registered as the business name.
These are very naive questions and typical for someone that needs a person experienced in buying and selling businesses to hold their hand.
I don't think that a full-blown business broker or lawyer who specialises in this kind of thing is needed here, but the OP needs to grow a pair of smarts ASAP. He has already taken the first steps, by asking basic questions here!
I want you to think of the business as a used car. The nice guy selling the damn thing may really be a nice guy, but even he is not aware of the rust above the exhaust pipe, the peeling brake lines, the worn clutch plate and the drop-off in power due to a slightly blocked catalytic converter. He's driven the car for a while and now is selling it and could not give a damn - but you should, so it is up to you to get wise and at least get someone who understands cars to look the thing over.
"Untoward"? I'd say "complacent".
That is probably true. The car (business) looks nice from the outside, but have you had a look underneath? Did you check the oil for metal particles? Did you look at the brake linings and disks? Did you check the body for rust and are all the door gaps perfectly even?
With a business, you need to not just go over the books with an accountant, but also check the supplier accounts, the state of the stock and any equipment and put a realistic value on all these things. Talk to customers,
talk to town planning officials about what is going to happen to your town in the near future. Talk to suppliers -
is this guy paying on time, do the entries in his books tally with supplier statements?
Then comes good will, potential and owner's wage packet. You may look at the business and use some 'rule-of-thumb' such as 'Gross profit times four!" or whatever you try to use. The problem there is, that profit, gross, net or EBITDA, is whatever you want it to be (well, almost!) For that reason, you need to go over the figures again and again and again. Never mind fancy calculations and P&L - does it make sense on the back of an envelope? Does the broader picture pan-out?
Potential is up to you, so never add value for potential (unless the business has some magic patent or other IP you could develop).
Businesses do not have potential - people (i.e. YOU) have potential!
The owner's pay packet is irrelevant and does not belong in the value of the business. You already get a pay-cheque, so you are protected by TUPE laws, should somebody else buy the shop.
And talking of TUPE, the fact that your local solicitor did not flag this up on the first day, tells me that he or she is not really up to the gig! Buying the assets only does not mean that the new owner does not inherit the contracts of employment. If you want to put a family member in the shop and fire one of the staff, the same conditions will apply, as if you were the original owner.
You come across as unbelievably complacent / arrogant for someone buying their first business! It's like you desperately want to go ahead and are trying to avoid finding a flaw! Good luck.
This is normal. Who wants to find problems with the perfect used car? It looks great, it drives perfectly and the guy is selling it for £8k when the book price is £16k - and now you are telling me that all the door and panel gaps are not even. Now you are telling me that it is an unregistered accident write-off and is worthless!
But on the positive side - businesses bought by rank outsiders tend to fail. BUT
businesses bought by employees tend to succeed - but only if they go in with their eyes wide open and are fully clued up!
So good luck!
