Advice needed

[Kate1982]

Let me try and make this as easy as possible for you to follow so you don't get bored.

-I rent a premises with another lady
-In this premises is my busniess (beauty) and her business (hair)
-They are 2 separate businesses but we share the same rent/utility bills

This arrangement has worked great for the last 3 years. However now she wants to sell her business(divorce). The way our rental agreement works is we are both responsible for everything that goes on in the place. Ie. So if she doesn't pay her half of the electric bill then I have to. Needless to say I do not want her to sell to anyone else. So I have made her an offer. (even though I don't want a hair salon)

My beauty business is doing well but isn't vat registered but if I combined the 2 businesses I would have to be vat registered. Even though this isn't an option as her business is completely run down and wouldn't pay it's own way.

My question is can I keep the 2 businesses separate even though they are in the same building? I have looked into limited companies but not entirely sure if this would apply. I have called my accountant but to be honest they were rubbish and just didn't get the point. I do not want to be vat registered as the businesses just couldn't cope at the moment. I will need to put a lot of money into the hair salon which is run down.

Sorry for the ramble. Please give me your opinions and experience.
Thanks

 

[EMMA AT ELITE]

Hi, I am not really able to advise you legally but I would guess that if you buy her business you would still be able to keep them separate but it would just mean 2 lots of tax returns etc even if you did combine them you still could not earn enough to be VAT registered. Do you know what your total profit has to be before you have to be VAT registered?

You have loads of options;
- You could rent out the hair salon to a stylist/ hair extension specialist
- Get some sunbeds in
- Rent some nail desks out
- make it bigger for you, a second treatment room

Wow this is really exciting for you, what are your plans to do with the extra space? x:hug:x

 

[smooth]

As a sole trader and working from the same premises you won't be able to keep them separate as the income from both businesses would go to you. If you wanted to keep them separate you would have to make one a ltd company but then you would have to make sure both paid 50% of the utilities and rent.

If her business is not doing well, why do you want to buy it and what value would you put on it? She may try to sell it as a going concern but how would you continue it as a hair salon?

 

[Kate1982]

If you wanted to keep them separate you would have to make one a ltd company but then you would have to make sure both paid 50% of the utilities and rent.

If her business is not doing well, why do you want to buy it and what value would you put on it? She may try to sell it as a going concern but how would you continue it as a hair salon?

We already share the utilities 50/50 so thats not a problem. I looked into the Ltd company but until now didn't know much about it. So having to learn fast. I believe I would have to pay a corporation tax which is about 20% so not sure how this is different from goin vat registered?

As for why would I want to buy her salon!!!! LOL
The simple answer is 'I don't'. I work part time at the moment as my business does great, my staff are fab and in general life is good. If I buy her salon this will al change. Good bye free time and extra cash.
HOWEVER put yourself in my shoes. If I don't buy from her then she will sell to someone else and god knows who that might be. She is the 2nd owner to have the hairdressers . The 1st lady made my life miserable. She was one of those very angry people who want to make everyone around them uncomfortable. Example. She locked one of my therapists in the stockroom. Or if my clients phoned on her telephone number downstairs she would tell them that it was a hair salon not a beauty salon and she couldn't give out my number!!! A sandwich sort me thinks.
So needless to say I don't want another person buying downstairs.
Lisa who owns the salon now is a pleasure to work with but owes a lot of money in rent etc. Which btw I'm responible for if she leave without paying. (What a mess huh.)

I just want it over. She asked me if I would consider selling with her but I have worked too hard at my business to let it go. And how would we split it? She is asking for about £30k for her business which I will not give. They are sooooooooooo quiet. Barely have any bookings for xmas and new year yet. (We are full already.) And her equipment is always falling to pieces. Her staff always complain they don't have the right stock in for their clients so they have to 'Make do'.

My OH says to offer her £15K as good will but thats a lot of money for something I don't want.

Sori for rambling on. Being positive though yes it is a great opportunity. It has a lot of potential.

Thanks for listening.

 

[smooth]

Corporation tax is what the ltd company pays on their profits, this is 22%. You then take a small wage £550 then the rest in dividends which is a very tax efficient way of doing it.

VAT is another aspect, basically if you earn above the VAT threshold you have to register for VAT and charge this to your customers. You can also voluntarily register for VAT but I would avoid this as it is a 'mare.

Are you both on the lease then which is why you have to pay it in full if she leaves/defaults? In that case I would not be keen to pay her any money especially if she is behind on the rent! Or at least take this into consideration!

Could you perhaps have a clause in her sale to say that you have to agree to the purchaser in view of what happened previously. That other woman sounded like a nightmare but even though this one is lovely, it sounds like she is not a business woman. You would not be buying a business by the sound of it just the privilege of having the space.

Hope you come to the right conclusion in the end.

 

[Kate1982]

Smooth thanks you really seem to know your stuff.
And your right she isn't business minded at all. Her salon is falling to bits and she is getting a new kitchen fitted at home. All the wage cheques bounce to her staff etc etc.

Yes we lease the property together. If I really wanted to be assertive I would refuse to buy the business and refuse to let her sell it which would only give her the opportunity of staying or walking. At the estate agents we rent from have told me I don't have to sign a lease with anyone I don't want to. However 1. I'm not thatsort of person even though I know I probably should be. and 2. News travels fast in our industry. I don't want all our clints thinking I just kicked them out on the street.

I'm having a meeting with her tonight so we will see what happens.
Thanks again for your advice I really appreciate it.

 

[smooth]

When is the lease up for renewal? Could you maybe consider signing it just yourself as it doesn't seem like she is financially able to commit to another term? You're right in keeping things amicable though but make sure you don't get a bad deal in the process of agreeing to buy her out

x

 

[Kate1982]

That's another thing the lease it due for renewal in January. So yes I could sign it myself but again that is essentially kicking them out. I think the estate agents would favour me though as my payments are always on time.
xx

 

[Kate1982]

Ok so I had the meeting with the hair salon owner tonight and looks like they are wanting far too much money for the business. About £30K. As a good will gesture I would be willing to offer £15K. But doubt they will take it. They said they might just stick it out but I know they can't do it. Their marriage is a mess and they are hanging on by a thread.

Part of me thinks that if I was a real business woman I would just tell the estate agents that I will not sign another contract with them. Which as I said will essentially just kick them out.. So basically give them the option of taking the £15K or nothing.

I need some different opinions. If you guys reading this were in my position would you sign a contract for 3 years knowing that they are having problems or not?

 

[smooth]

Hopefully you'll get other posts but at the end of the day only you can decide. As a business woman, I would not sign a contract with this woman if she is not in a secure financial position and she may be selling in the future. I doubt if someone else will buy the business as there is only 2 months left of the lease! There is no guarantee you'll be offered another lease so you could be paying 15K for nothing.


Sit it out, if possible try to negotiate a contract for yourself but obviously discuss your concerns with this woman too.

 

[femmefan]

With only 2 months left of lease, rent arrears, outdated equipment, little or no stock and a very small client base, this lady doesn't have a business to sell!

Maybe get a specialist valuation of her business, including an analysis of her accounts and that will give you (and her) an idea of what she could expect on the open market. You simply can't pluck figures out of the air!

 

[persianista]

The business is not worth 30k, doubtful if it is worth 15k in this climate.

The advice I'm gonna give is easy from this side of a screen, but difficult for you in real life out there.

At the moment, do nothing. Wait. She will either need to close or sell. My guess is that nobody will be interested. If they are you can either outbid them or accept them.
If she closes, you get the premesis for nothing, and either run it as a hairdressers, or expand your beauty into it.

I know your instinct is to get this situation sorted asap, but sometimes stepping back and seeing what unfolds is the best avenue.
You can always indicate to the estate agent that you are happy to sign for the whole premesis if nothing comes of the sale and she leaves.

 

[Kate1982]

The business is not worth 30k, doubtful if it is worth 15k in this climate.

At the moment, do nothing. Wait. She will either need to close or sell. My guess is that nobody will be interested. If they are you can either outbid them or accept them.
If she closes, you get the premesis for nothing, and either run it as a hairdressers, or expand your beauty into it.

I know your instinct is to get this situation sorted asap, but sometimes stepping back and seeing what unfolds is the best avenue.
You can always indicate to the estate agent that you are happy to sign for the whole premesis if nothing comes of the sale and she leaves.

This is good advice. Thanks for taking time to help me.

The way things stand at the minute she isn't able to try and sell the business to anyone else because I'm not willing to sign a contract with someone I don't know. (Lets face it who would.)
So I hold all the cards really.
Our contract is up for renewal in January. They have sent it through but why would I signwith someone in such a unstable situation.

Part of me wants to say to the estate agent "I am more than willing to sign and take the whole premises on BUT I won't sign with them."

Surely they would pick me who always pays bills on time over her who still owes them money from months ago.

But my conscience says this is a really horrible thing to do as essentially this would mean they just had to leave with nothing. Gossip travels fast in our industry. Do I really want my clints thinking I'm that woman that screwed over the hairdresser and took her business??

Or does that kinda thing not really matter in business?

If we had longer left on the contract I could sit back and wait but we don't. I'm going to try and get them to do a temporary contract for us to get this sorted.

 

[Sarah-Jean]

Are you very close friends with this woman? Because frankly if you aren't then I'd do anything to keep my business going - if that meant telling the agents I'd take the whole thing on and pushing her out, well so be it.

Word does travel, but most people know there are two sides to every story, and to be honest memories don't last long and new clients will come for any that you lose (although I doubt you would as personally that wouldn't stop me from going somewhere).

At the end of the day, you have to think about yourself and your business. If this business puts a roof over your head and food in your families mouths, then that's all that really matters.

As someone else said, it doesn't sound like her business is worth anything from what you've described and I certainly wouldn't hand over £15k for it.

I would make it clear to the estate agents that no matter what happens you are willing to continue with a contract alone but you are not willing to sign with someone you don't know.

Ruthless maybe, but you don't want to end up in the situation you were in before her, and you don't want your business to be dragged down with her failing one. Her issues are not your issues so I would be looking to separate the two completely before it starts having any impact on yours.