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Buying an Existing Business

- Updated: 20/04/2012
Buying an Existing Business

Sometimes it is easier just to buy an existing business rather than to go through the whole process of setting a up a Business Yourself from the very begining, and in many cases start to build up a customer base. Depending on the type of Business that you decide to buy you may just need to register a change of ownership with the Ayuntamiento.

However you need to get an understanding of the reason why the current owners are selling - thriving businesses are rarely sold at reasonable prices, so ask around and make sure that you are not buying a white elephant - speak with your Lawyer : He may even be aware of the History of the Business and may be aware of pending planning regulations or required permissions from the Ayuntamiento that could adversely effect the smooth running of the Business in future.

Another potential disadvantage of buying an existing business is that you must also take on the staff that go with it and you will be subject to all the labour and social security obligations of the previous owner. Make sure that your lawyer checks what kind of contracts are in place for the staff, as you will be the one who has to honour them. Check in particular that there are no outstanding disputes with any staff. The previous employer and you are jointly responsible for any claims made before the sale and up to three years afterwards.

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Purchase Procedure

The procedure for buying a business is similar to buying a House, but you need to do adequate preparation before proceeding. You usually need to make a 10 per cent deposit as soon as you make the decision to buy to show your commitment and take the Business off the market, and pay the remainder 30 to 60 days later, assuming all goes to plan. Get a receipt for the deposit and ensure that the money is not passed over to the Seller, but instead held by a third party like a Lawyer or Gestor. This is so that you can claim the Money back if there are complications shown in the legal checks. Once you've paid the deposit, the current owner will let your lawyer have the title deeds (escritura) or a copy of the lease and an inventory of what's included in the price. Your lawyer will then check that everything is in order and that they are free to sell the Business.

Your lawyer should also check that all the licences are in place to operate the business legally (see below) and that there are no outstanding debts attached to the business or the property and no outstanding disputes with staff if the business is being sold with employees. Important: When you buy or lease a business in Spain, you also acquire any outstanding debts and any staff and social security obligations.

The only time that you should lose your deposit is if you change your mind to continue with the purchase without good reason - if there are any legal complications then it should be returned to you in full.

If the Business is leased you need to ensure you can fulfil your responsibilities as leaseholder before you sign the contract. During the term of the lease, you must pay all service charges such as water, electricity, telephone and local business taxes.

Licences

One of the most attractive advantages of buying an existing business is that you can usually begin trading quickly because any licences that are required continue to be valid if it changes hands. You just need to register a change of name on the licence with the Ayuntamiento and your Lawyer or Gestor should do this for you. However this can not be guaranteed if you intend to change the nature of the Business that you have just bought. An Agent should never sell you an unlicensed business and unsuspecting purchasers could simply be closed down by the police as soon as they open.

Your Agent should make sure that the business has all the necessary licences, and your Lawyer or Gestor should double-check them to make sure that they are valid and in date. Don't sign any agreement until you have seen the licences (which should by law be displaid on the premesis) and have copies.

If the business is trading while waiting for a licence, this should be carefully checked with the issuing authority – especially the reason for the delay. In certain circumstances, the business can legally be offered for sale without a licence. If this is the case, your lawyer should check whether there are any potential problems obtaining one and ask for the price to be reduced accordingly.

Comment on this Article

 
Many business owners choose an industry based on their personal passion or technical knowledge and skills. Whatever your motivations for choosing a business, it’s important to be certain that you can bring skills and know-how that will make you competitive in the market. Signing off Steve http://www.chandlersca.co.uk
Steve - Camden Ca - Wed 1st Feb 2012