Buying business assets. How to structure tne transaction?

Discussion in 'Accounts & Finance' started by Mack20, Aug 2, 2020 at 12:25 PM.

  1. Mack20

    Mack20 UKBF Newcomer Free Member

    2 0
    I am looking to purchase a restaurant which is currently underperforming due to current situation as well as due to poor management by the current owners but the location and the business has great potential.

    I am currently in full time employment and not able to run the business myself. I have family members who have experience in running restaurant but they are not able to invest in the business at the moment.

    Can you advice me what is the best way to structure the purchase transaction and set up the business?

    I was thinking of setting up a limited company which will buy the asset (Goodwill, a new lease from landlord, fixtures & fittings and equipment). I will be the sole director.

    The people who will operate the business can operate under a different limited company owned by them and operate under licensing agreement with my ltd company. In this way I can get the benefit of owning the business assets and get income whilst working. And in future if I want to run the restaurant myself then that option is also open to me.

    Investment amount is £60k.

    I would highly appreciate your advice and suggestions regarding the best course of option I should take.

    I am happy to pay for specialist tax advice and if you can suggest some good tax advisers who will charge reasonable fees would be appreciated.

    Thanks

    Mack
     
    Last edited: Aug 2, 2020 at 12:34 PM
    Posted: Aug 2, 2020 at 12:25 PM By: Mack20 Member since: Aug 2, 2020
    #1
  2. Scalloway

    Scalloway UKBF Legend Free Member

    16,240 3,436
    Does the restaurant have staff at the moment? Remember you will need to take them over through TUPE.

    Have you engaged a solicitor to draw up the licensing agreement?

    And have you looked at controls to ensure the staff won't be able to rip you off while running the restaurant?
     
    Posted: Aug 2, 2020 at 3:38 PM By: Scalloway Member since: Jun 6, 2010
    #2
  3. Mack20

    Mack20 UKBF Newcomer Free Member

    2 0
    The restaurant have skelwton staff at the moment and the trading company is likely to offer them continued employment so the TUPE issue will be dealt by them.

    I have not engaged solicitor yet as I am trying to figure out the optimal structure of the purchase of the assets and how to go about doing it.

    With regards to the control issues again as I won't be running the business it probably does not concern me. It will be a matter for the entity which runs the business.

    I am keen to some advice on the first part which is how to structure my purchase. Shall I own the asset as an individual or open a limited company then license the assets to third party ltd company who will run the business?

    What would be most tax efficient structure legally to own and benefit from the investment?
     
    Posted: Aug 2, 2020 at 6:10 PM By: Mack20 Member since: Aug 2, 2020
    #3
  4. John Hemming

    John Hemming UKBF Regular Full Member

    296 40
    That is a fact dependent decision you should put to a paid advisor.
     
    Posted: Aug 2, 2020 at 8:28 PM By: John Hemming Member since: May 23, 2019
    #4
  5. Clinton

    Clinton UKBF Big Shot Full Member

    4,951 2,114
    @Mack20 , you've absolutely no idea what you're doing. Go pay a professional who understands this stuff instead of trying to get freebie advice from people you don't know.

    You haven't the vaguest idea about TUPE and you have zero appreciation for the potential liabilities you're taking on. You expose the sheer extent of your ignorance by saying that the "trading company" will deal with the TUPE.

    Your question is about how to "structure the purchase" and it appears you do not even know what a "structure" is in this context. Deciding the corporate structure of the entity making the purchase is not a structure of the purchase. Don't use fancy words and expressions if you don't know what they mean.

    What on earth makes you think you're smart enough to do that without professional assistance?

    Yes, even to decide the basics you need expert advice and this is especially so given you significantly over-estimate your ability and knowledge (or underestimate the complexity of an asset purchase).

    It looks like some struggling restaurant is going under and you figure you can make some profit by using your money to buy the assets and have your family members run the business. Sounds like a recipe for disaster no matter how you "structure the purchase" and even if you can improve on the half-ars*d plan you've described above.

    Just don't do it without getting proper advice! Yes, it'll cost you a few grand.
     
    Posted: Aug 2, 2020 at 9:13 PM By: Clinton Member since: Jan 17, 2010
    #5
  6. Argentum Tax

    Argentum Tax UKBF Contributor Free Member

    87 17
    At last, someone advising sensibly!
     
    Posted: Aug 2, 2020 at 9:19 PM By: Argentum Tax Member since: Aug 24, 2015
    #6
  7. Mark T Jones

    Mark T Jones UKBF Big Shot Free Member

    4,647 1,718
    I'm afraid I have to agree with Clinton here. I deal extensively in the independent restaurant sector and to me this has all the hallmarks of an operator shedding their liabilities onto a naive purchaser who wants to be 'clever' with business structures.

    Every business ever sold has had 'great potential'. That potential is your reward if you happen to be brilliant at what you do (85% aren't), it's not what you pay for.

    My advice, don't even spend a penny on professional advice yet. Take a big step back and ask some deep, searching questions about why they are selling, what they are selling and what value you are actually bringing to the transaction.
     
    Posted: Aug 3, 2020 at 9:54 AM By: Mark T Jones Member since: Nov 4, 2015
    #7
  8. The Byre

    The Byre UKBF Legend Full Member

    10,059 4,114
    Have a look at my videos (link in signature) on buying a business (2 x ten-minute videos) and heed what @Clinton and @Mark T Jones say. Esp. that bit about why are they selling!

    99% of struggling companies are worth their assets and nothing more! Never forget that! Their goodwill and all their previous work ain't worth a bucket of warm spit!
     
    Posted: Aug 3, 2020 at 12:45 PM By: The Byre Member since: Aug 13, 2013
    #8
  9. Chris Ashdown

    Chris Ashdown UKBF Legend Free Member

    11,685 2,429
    A Indifferent or bad reputation can take a very long time to convince customers to give it a new try

    A advert in the local free paper stating under "new management" means FA to many potential customers, who think the old staff will be tuning out the same old slop under a new smiling manager
     
    Posted: Aug 3, 2020 at 3:01 PM By: Chris Ashdown Member since: Dec 7, 2003
    #9
  10. SillyBill

    SillyBill UKBF Regular Free Member

    210 98
    I can't even comprehend what is involved in the decision making process of buying a failing business and then effectively doing nothing but subbing the operation out of said failing business to another business (potentially owned by family members). Where do you even start? I am not a sector expert but even I know it is notoriously difficult to run a successful restaurant where you have a dedicated owner in the business driving it day-to-day. Without that, hiding to nothing comes to mind.
     
    Posted: Aug 3, 2020 at 5:57 PM By: SillyBill Member since: Dec 11, 2019
    #10