Starting new business and risks

samboston

Hello Everyone

I am new to all this and have never run a business before, so any help would be appreciated

I am thinking of buying an existing business from someone. I will be the new leaseholder. It is a fast food retail outlet. The lease is for 10 years and the rent is £160 per week. I believe the rent has to be paid to the landlord for the term of the lease. The current leaseholder is trading as a sole trader.

- I would like to carry on running it as a sole trader as I believe this is easier . However, is it possible to change it to a Limited company after 6 or 7 months of trading to achieve limited liability?

- Also, if everything went horribly wrong what would be the best way to protect my existing assests (ie my house). For example, if the business stopped trading then I would still have to pay the landlord his rent and bills etc. for 10 years, could the landlord come after our house to get his money? My wife and I own a house and have a £31,000 mortgage. There would be no charge on the house to raise money for the business

Thanks for reading.
Sam

richt71

samboston wrote:

Hello Everyone

I am new to all this and have never run a business before, so any help would be appreciated

I am thinking of buying an existing business from someone. I will be the new leaseholder. It is a fast food retail outlet. The lease is for 10 years and the rent is £160 per week. I believe the rent has to be paid to the landlord for the term of the lease. The current leaseholder is trading as a sole trader.

- I would like to carry on running it as a sole trader as I believe this is easier . However, is it possible to change it to a Limited company after 6 or 7 months of trading to achieve limited liability?

- Also, if everything went horribly wrong what would be the best way to protect my existing assests (ie my house). For example, if the business stopped trading then I would still have to pay the landlord his rent and bills etc. for 10 years, could the landlord come after our house to get his money? My wife and I own a house and have a £31,000 mortgage. There would be no charge on the house to raise money for the business

Thanks for reading.
Sam

Yes Sam you can indeed start as a sole trader and change to a limited company. Obviously you'd need a new bank account etc.
In answer to your question about debters going after your house I'm afraid the answer is yes if you got a lot of debt they could put a charge on your house for the amount owed (obviously this would only happen after going to court!). A limited company would limit your liability but you need to speak to an accountant to explain the liabilities that can be limited.

WHA

Just converting to limited wouldn't automatically limit your liability for the lease - if you start as a sole trader, you remain personally liable for the lease until you negotiate a new lease or until the term ends, so when you became a limited company, you'd need to get the landlord to tear up the old lease and give you a new one in the company name to benefit from limited liability for it.

motorguy

Why not just start as a limited company now? effectively, lend the business the money you would otherwise be using

Snow_Dog

You can start up a ltd company very cheaply by filling out the forms from companies house yourself.

There are also companies that set it all up for you, or your accountant can advise (they will probably either do it for you or use an agent). Remember though a lot of accountants will charge more for the annual accounts on a ltd company than a sole trader.

MalcolmCooper

Assuming your married and the house is in joint names speak to an IFA about switching your mortgage to tenancy in common. This will allow you to put say up to 99% of the house value in your wifes name. You retain 1% which protects you. No one will buy the house until you agree to sell your 1%. If everything went wrong with the business though all your creditors could come after you for is your assets, i.e 1% of the value of your house.