Buying and then striking off a company
Discussion
I wish to buy a company that has an outstanding directors loan (company owes money back to director) that will be written off this leaving the balance sheet positive.
I only want the lease as existing occupant has gone back to work.
I intend to buy all the shares In company for £1 and then strike it off after transferring the lease.
Any obvious pit falls to be aware of beyond owner having skeletons in the cupboard?
Thanks!
I only want the lease as existing occupant has gone back to work.
I intend to buy all the shares In company for £1 and then strike it off after transferring the lease.
Any obvious pit falls to be aware of beyond owner having skeletons in the cupboard?
Thanks!
Eric Mc said:
If the company "writes off" money it owes to someone else -
a) why is the director allowing this?
b) the cancellation of the balance owed to the company effectively turns the balance "written back" to the company into company "income" which will be chargeable to Corporation Tax.
The company owes the director the money. Director is writing it off.a) why is the director allowing this?
b) the cancellation of the balance owed to the company effectively turns the balance "written back" to the company into company "income" which will be chargeable to Corporation Tax.
AnotherUsername said:
The company owes the director the money. Director is writing it off.
And therefore the company is going to have to "write back" the credit balance (i.e. the debt to the director) to its profit and loss account - which then becomes a credit entry in the profit and loss. In other words, it becomes income to the company which will enhance the company's profit and therefore create additional Corporation Tax liabilities.There are the obvious pitfalls that have been pointed out in creating a taxable income by writing off the loan etc. but no one seems to have mentioned, you buy a company and you also buy all the skeletons in the closet. You say it operated as a franchisee but of what sort of business? Is there risk of customers coming forward with liability claims etc., suppliers who haven’t been paid or put in onerous contracts that still need to be cleared off etc. but may not have been accounted for properly etc. etc.
If you do buy it, make sure you get some appropriate warranties put in place and the ability to pursue the seller for any historical but currently unknown liabilities. Or, you may be able to buy some insurance but the cost may outweigh the perceived benefit for you.
If you do buy it, make sure you get some appropriate warranties put in place and the ability to pursue the seller for any historical but currently unknown liabilities. Or, you may be able to buy some insurance but the cost may outweigh the perceived benefit for you.
I don’t mind sharing this here as it may help someone in the future.
I originally thought I’d buy the company and transfer the lease. Now I’ve learnt that it’s more beneficial to transfer the DL I’ll sit tight and see what skeletons appear as there isn’t really time or financial reward enough to spend ten thousand with a solicitor chasing guarantees etc.
If it turns out there are skeletons I’ll close it and just use the lease.
It’s all fun and games!
I originally thought I’d buy the company and transfer the lease. Now I’ve learnt that it’s more beneficial to transfer the DL I’ll sit tight and see what skeletons appear as there isn’t really time or financial reward enough to spend ten thousand with a solicitor chasing guarantees etc.
If it turns out there are skeletons I’ll close it and just use the lease.
It’s all fun and games!
AnotherUsername said:
I don’t mind sharing this here as it may help someone in the future.
I originally thought I’d buy the company and transfer the lease. Now I’ve learnt that it’s more beneficial to transfer the DL I’ll sit tight and see what skeletons appear as there isn’t really time or financial reward enough to spend ten thousand with a solicitor chasing guarantees etc.
If it turns out there are skeletons I’ll close it and just use the lease.
It’s all fun and games!
It is indeed all fun and games. I've worked in a relevant industry for about 20 years now and have read far too many share purchase agreements, warranty agreements etc. and seen it go wrong and very well. Lawyers are expensive upfront but can save you a lot of headaches and money later on!I originally thought I’d buy the company and transfer the lease. Now I’ve learnt that it’s more beneficial to transfer the DL I’ll sit tight and see what skeletons appear as there isn’t really time or financial reward enough to spend ten thousand with a solicitor chasing guarantees etc.
If it turns out there are skeletons I’ll close it and just use the lease.
It’s all fun and games!
It's always exciting to close a deal, just don't lose sight of the risks in pursuit of the potential reward!
AnotherUsername said:
I will be both parties of the lease, that’s if I even need to transfer it
When you say you will be both parties, you won't be landlord will you? The company will be tenant and you personally will be assignee. That's the same amount of work and cost as simply assigning the lease directly to yourself, so you'd have to really want the company as well to make it worth buying.Gassing Station | Business | Top of Page | What's New | My Stuff