Help, Worry keeping me up all night!

bossanova_2

I'm so worried about my partner going self employed, its keeping me from sleeping. His (well meaning) parents have borrowed a huge sum of money to set him and his brother up in business together. This money (£43,000.00) was borrowed from a bank in his parents name back in October and is secured on their mortgage. My partner has been given some of this money already(£5000, of which we still have £4000 left) and his brother has been given £10,000 which as far as i know has been used on his tax bill. The rest of the money is to be used for 3 yrs rent and rates on a rented shop and set up cost/equipment.
How much info do we need for keeping books?

I can't understand how my partner will be able to claim his business expenses for rent/equipment etc when the money will be paid upfront and then he pays it back to his parents as a loan repayment?
I am also worried as it looks like they are going to sign a 6 yr lease on the shop, but they only have 3 yrs rent money and the loan is over 5 yrs.

My partner and i have a joint mortgage together, could this be affected if the business fails? I am already dreading the day he gives up his job, we are already struggling to pay our way as it is.

Not sure if this post is in the right place, but as i see it as a huge debt i thought i'd start here.

Any advice or help would be appreciated.
Thanks

itsnever2lateisit?

It is always a big worry looking after a 'new startup' business. As for records, every receipt for money in and out. Is this venture a partnership or a Limited Company?
The money they have is a loan, and goes on the balance sheet, the rent is an expense of running the business.

I would urge you to use every free tool at your disposal, local enterprise agencies, HRMC etc etc to obtain advice and help. If you need an accountant, shop around, and make sure you have a proper brief prepared to ensre that they do what you want then to do, not the other way around. Book keeping is quite simple really, and while an accountant will come over very helpful, what they want is more business from you. I know, I am one:rotfl:

Bismarck

The short answer is keep everything you can for the books...you can bin/shred stuff later if it's not needed but you don't want to be at a critical time for a tax return and stuff is missing!

You have too many questions here to relax and I can't really blame you....Business link were a good start for us but planning is everything...don't rush or you'll suffer later.

"My partner and i have a joint mortgage together, could this be affected if the business fails? I am already dreading the day he gives up his job, we are already struggling to pay our way as it is."

If you can stop it, do so....unless there is a guaranteed income from the new venture from Day One or you have a survival fund, lack of cashflow could push you over the edge. As you're a couple, don't you have a say in this?

bossanova_2

Thank you , itsnever2lateisit,

I think it will be a partnership, no experience of running a business before. Will my partner and his brother need to have a separate balance sheet as they will both be self employed?

Should they have a business account (or one each?) as the money they will be repaying differs due to them having a different amount in advance?

Rent/rates and equipment will be 50/50.

Thanks for help we are new to this.

bossanova_2

Thanks bismarck,

I would stop it if i could! I am in the dark about most of it and have no paperwork about the loan or how it is being used. Just have a really bad feeling about whole thing!

itsnever2lateisit?

bossanova wrote: »

Thank you , itsnever2lateisit,

I think it will be a partnership, no experience of running a business before. Will my partner and his brother need to have a separate balance sheet as they will both be self employed?

Should they have a business account (or one each?) as the money they will be repaying differs due to them having a different amount in advance?

Rent/rates and equipment will be 50/50.

Thanks for help we are new to this.

A Partnership is no different than a marriage, and it is important to draw up a legal agreement between the partners, this help to avoid arguements, and also settles them should they arise. If no agreement is in place the the Partnership Act (1894) applies on dissolusion. As a partnership there is only one set of accounts but also an 'appropriation' account to show distribution of profit etc between the parties.

Yes a business bank account is a must. It is important to separate business from personal. However, having said that as far as HMRC are concerned there is no difference between the individuals involved and the business itself as the business is not a separate legal entity. Therefore the risks involved extend to the personal assets of the partners. Each partner will need to submit their own tax return each year together with a supplimentary return for a partnership

I cannot stress too highly the importance of planning. Do they have a business plan? An assement of the market? a unique selling point? (why would customers come to them rather than use existing established businesses).

What would happen to predicted profit if say sales were to drop 10% or costs increase by more than anticipated.

Sadly 2/3rds of new businesses fold in the first 3 years, usually because of a lack of planning and under capitalisation. Those that survive 3 years tend to become well established and flourish.

bossanova_2

Thanks again,

WOW thats a lot of stuff i've not heard before, as far as i know there is no business plan and no business account and also no partnership agreement.
This business is based on the reputation of my partners brother only (as a tattooist) and my partner will be training still for a while.

His parents have borrowed the money and only they have details of this. I don't know how its being used or how it will be used, should my partner already have a balance sheet?

I wish i had more information, What concrete things do i need to know??
I need to re-mortgage in feb 09 and worried that this will make it impossible.

Bismarck

The "Small Biz & Charity Organisers MoneySaving" thread is probably a better place for this...you questions made me look for it so thanks for that...it also prompted me to do something else so cheers for that too!

Quick tip: watch everything that is spent "for the business" as cash can easily disappear rapidly and also never be accounted for. Also check what you and you partner are actually putting into the business...itsnever2lateisit? gave some great advice which is, I'm afraid only thetip of the iceberg. Ask every question you can of the parties involved and keep on asking until you're happy or calmer....get it in writing and keep an eye on what's being borrowed!

bossanova_2

It seems worse now.........found out yesterday that the money borrowed for this business is a remortgage on my partners parents house and it will run for 25yrs at 300 a month!

My partner feels he will be letting them down by not starting this business but i'm so worried i cant concentrate on anything else.

I want to have no part of it, if he signs a 6 yr rental lease and is in debt to his parents for 25yrs it will ruin us. we don't know how to run a business and have no idea how much of the loan is left or how it will be fair to pay back when his brother has already spent 10,000 of it and there is no shop yet!

I really dont want to upset anybody but its hard when i have so many bills to pay, also my partners brother has not worked for a yr due to ill health and has had a lot of financial help due to this.

itsnever2lateisit?

Dont forget there will be sales that generate income. Its just a question of whether they come soon enough and high enough to finance you day-to-day living expenses. So ruination might not come about although from what you have posted so far, I dont think this business has been properly thought through

Pobby

What kind of business is this?