Acquisition Vehicles: Buying a Business

If you are buying a business, you will need to decide the structure under which your new business will trade. You have three options each of which has different issues, you can:

1. Trade under your own name
2. Trade in joint names (e.g. husband and wife, business partners)
3. Trade as a limited company

It is important that you consult an experienced solicitor, as your decision could have serious legal and tax consequences.

Own Name

If you buy and trade as a business in your own name, you will be personally responsible for any debts and non-payment could lead to bankruptcy. Trading in your own name also means that any claims made against the business will also be claims against you, and you will be responsible for paying any compensation awarded.

Joint Names

If you intend to buy a business with your husband, wife, civil partner, or a business partner we would recommend creating a partnership agreement, which will cover things like the amount of capital each partner has put into the business, the share of the profit each partner is set to receive and how long the partnership will last.

Speak to an experienced commercial solicitor today about partnership agreements.

PARTNERS BEWARE! Joint ownership means that BOTH partners will be personally responsible for the business, and any debts of the business will be the personal debts of each partner. Non-payment can therefore lead to bankruptcy of both partners. So, if your partner incurs a business expense (e.g. buys or leases a new car) in the usual course of the partnership business, each of you will be liable for payment. Therefore choose your partner(s) very carefully!

Company Name

From a legal perspective the safest way to buy and run a business is in the name of a limited company, which can be set up specifically for that purpose at minimal expense. You and any partners will then become directors and/or shareholders in that company, and be paid by way of a salary (as employees) or dividends (as shareholders).

Setting up your business in this way protects you from personal liability for things like debts and compensation claims, provided there has been no fraudulent or wrongful trading.

Speak to Business Lawyers Direct

If you are planning on buying a business, whether as a sole owner, in a partnership or as a limited company, take legal advice from one of our senior solicitors and speak to your accountant about any tax consequences.

Call Business Lawyers Direct today on 0333 777 8003 or contact us via our online enquiry form and we will be pleased to discuss your requirements.