Help needed with selling my buisness

[vikki1975]

Hi,

Im looking for some advice regarding the sale of my business. My accountant is confusing and fustrating me with his advice and would like to see if you think what he is saying is the right way to go.

I purchased my shop in 2007 for £65,000 to include 125 year lease, goodwill fixtures ect. I have since built the shop up and went Ltd company in August 2010, until then I was a sole trader.

I have just had an offer of £105,000 that I have accepted and am in the process of getting the legal ball rolling.

I have had to involve my accountant as to proportion of the business to be sold, lease, goodwill ect.

He has informed me that as I am a Ltd company that the company will be selling the business and not myself !?!? I cant get my head around that !! I bought it with cash I raised from remortgaging my home 4 years ago and built it up to the level it is, under his advice I formed the company in august last year. The company didnt then buy it from me, the land registry has me down as the owner and not the company so how is it that the company owns the business and sells it ??

He has also said that the money will then remain in the company and I will not be able to touch it for some months.

If this is the case I cant sell it as I wont have an income and have huge personall debts to pay plus kids to feed ect ect.

I was selling to pay off my debts and use the money to live on till I either find paid employment or buy another small easier less demanding business.

Is he right in saying that I personally cant sell it ?? im having nightmares now that I will have to pull out of the sale and battle on till it kills me.

Thanks

Vikki

 

[elaine@cheapaccounting]

Errm without seeing the accounts etc it is so difficult to give good advice about this.

Given the amounts involved I would suggest a second opinion may be of befit.

Have a word with Alpha on here - Alan Moore. He is a friendly chap (don't tell him I said that).

 

[vikki1975]

Thanks Elaine, a second opinion is defo needed and if that means moving accountants to one that is going to help me sell to my advantage and gain and get me the money back to me where it belongs it might be worth the hassle involved in moving just to finalise the sale and accounting.

The Ltd company has only been trading since august so no accounts have been due yet. I have sole trader accounts for the 3.5 previous years.

should I pm that really great guy you mentioned ;-)or does he just answer on the threads ?

 

[elaine@cheapaccounting]

PM him and I'll drop him an email to tell him to check in here

 

[vikki1975]

Thanks,

This whole thing is going to consume me till I resolve it.

I need the sale to go through for the sake of my sanity and need the money from the sale straight away to save my home and family finances.

 

[elaine@cheapaccounting]

Well I can't guarantee that Alan won’t drive you mad

if he doesn't get back to you drop me a PM and I will suggest someone else.

 

[Alpha]

Elaine

thanks for the recommendation in this post

vikki

hope what I have outlined makes sense but if you have any specific queries then please come back to me and I'll do my best to answer.

 

[elaine@cheapaccounting]

ahh your 4000th post and I get a thanks

 

[robindunne]

The company didnt then buy it from me, the land registry has me down as the owner and not the company so how is it that the company owns the business and sells it ??

There is a missed opportunity there. On incoporation the Ltd company can buy the business from the individual. The purchase is allowable for Coporation Tax and the individual then pays capital gains on the proceeds of the sale.

Capital gains are taxed at a lower rate, with a higher allowance than income. If done correctly you could save a large amount.

 

[vikki1975]

Thanks to all,

Im still as confused as ever and am now just so peeved off I ever went Ltd in the first place as it feels like a rope around my neck and its getting tighter !!

Why wasnt I advised off the downsides to being Ltd when I incorporated and told what a hastle it would be when I sell !!

If my accountant has missed out on a opportunity to save me money I wont be happy.

 

[elaine@cheapaccounting]

Now we don't know that he has missed it.

My thoughts are that he may well have done exactly that and maybe you have not appreciated that this is the case.

As I said - you need to speak with someone else and get them to all at your paper work and accounts, if you are not happy with the advice that your accountant is given.

But at the moment, with respect, we don’t know how this has been set up.:|:|

 

[vikki1975]

He hasnt allowed anything for the purchase of the business by the ltd Company. He has assured me that as the 1st years accounts have not being made up this can be ammended and it put as some form of Directors loan ??

If that is the case and it was a mistake on his behalf not to have allowed for purchase from sole trader then im hoping he is telling me right by saying he can rectify it.

I did only Incorporate in August 2010

 

[robindunne]

He hasnt allowed anything for the purchase of the business by the ltd Company. He has assured me that as the 1st years accounts have not being made up this can be ammended and it put as some form of Directors loan ??

If that is the case and it was a mistake on his behalf not to have allowed for purchase from sole trader then im hoping he is telling me right by saying he can rectify it.

I did only Incorporate in August 2010

All is not lost. If he hasn't done the necessary work on incorporation he still has plenty of time to do so. The Directors Loan approach is usually the way to handle this. The proceeds of the sale of the business to the Ltd company will sit in the loan account for you to draw on as you wish without any tax implications.

Any capital gain will be included in your 10/11 self assessment and as mentioned before, the threshold is quite high and the tax is lower than income.

He may have already have this in mind, so would be tactful when approaching him.

 

[accounting-help]

This is quite tricky without further information.

So presumably you sold the business to the company and also the property.
If you sold the property then there must be a legal agreement via the land-registry. Can you not then change the agreement since it is between two parties which you own?

The ideal scenario would be if you could sell it personally so that you would receive entrepreneur's relief and hence a tax break.

 

[vikki1975]

Thats how I would like it to be but accountants trying to say Ltd Co owns the business. My Point is exactly the one you mentioned and that legally I personally own the property as I have deeds in my name and not the Ltd Companies. My solicitor has said that I defo own the property side regardless.

 

[vikki1975]

And no I never sold the business to Ltd company. No money was ever exchanged and i was never told that by going Ltd I was giving my sole rights to the business over to the company.

 

[Strontium Dog]

Oh dear. I suspect that the accountant may have got the process right, but not explained it well (or at all!) to you. Chances are things are ok, and you will be credited with a directors loan account to extract the sale proceeds from the company.

What the accountant proabably had in mind was for you to retain the benefit of the long lease personally, hence no land reg transfer, and the ltd company carrying on the trade to occupy the building on some sort of licence. Its not an irrepairable situation, although when we do incorporatation on behalf of clients we tend to spend more time documenting stuff as we go. Also we would have carried out a goodwill calculation at the time of incorporation, to determine the size of the directors loan. Your man might have done all of this, and not communicated well.

All of this would have been pretty tax efficient, but I expect you wrong-footed your accountant by selling up so quickly - did you discuss timescales with him when planning the incorporation? As it is it still might not produce a bad result from a tax angle.

 

[Rhodes100]

You can do one of two things:

1. Sell the assets of the Ltd Company to the 3rd party, in which case you have the problem of extracting the £100k from the Ltd Company, or

2. Sell the shares of the Ltd Company so you will be assessed on the capital gain.

What value did your accountant put on the business on incorporation?

Perhaps if the sale completes in the new tax year it might be possible to split the capital gain between the two tax years and use your allowances reducing the tax liability.