Investing in a new shop
Discussion
The set up costs and shares will be 10% myself and 90% for the business partner. The BP will run the shop full time and I will just be doing a bit of invoicing, paying bills, keeping an eye on the bank in the background.
My question is and I think I know the answer, If we both sign for a lease on a shop and the business fails I'm thinking that the landlord can come after me for 100% of anything that is due to be paid not just the 10% (dont think I can sign for 10% on a lease.
I'm also thinking they will come after me other than the BP as I have more assetts they can chase and the BP has none.
Also any other pitfalls with a 10/90% split you can think of would be helpful.
My question is and I think I know the answer, If we both sign for a lease on a shop and the business fails I'm thinking that the landlord can come after me for 100% of anything that is due to be paid not just the 10% (dont think I can sign for 10% on a lease.
I'm also thinking they will come after me other than the BP as I have more assetts they can chase and the BP has none.
Also any other pitfalls with a 10/90% split you can think of would be helpful.
Insurancejon said:
if this is as a standard partnership rather than Ltd co, then you will be liable "jointly and sever ably" .
Not just on the lease, BUT FOR EVERYTHING. Water, eleccy, suppliers, rates etc.
I'd be sticking it in a ltd co sharpish with a watertight shareholders agreement
Yes this will be a LTD Company with 10/90% share split. The utilities will be in the LTD company name but I'm thinking the lease will need to be in our names. I may just tell the BP to sign the lease on his own.Not just on the lease, BUT FOR EVERYTHING. Water, eleccy, suppliers, rates etc.
I'd be sticking it in a ltd co sharpish with a watertight shareholders agreement
singlecoil said:
Good luck getting a lease without giving a personal guarantee, ltd company or not.
Yes good point, I could get a lease no problem with my income and assets but no chance am I signing a lease as only a 10% share holder. The BP with 90% may stuggle with this as he has a rubbish income and no assets. I'm also not signing a seperate guarantor.Edited by PAULJ5555 on Wednesday 31st July 12:17
Even in today's depressed retail market I think you'll struggle to find a shop, in a reasonable location, without paying at least 12 months rent deposit and giving personal guarantees.
The cost of letting commercial property is so high that most landlords will want the comfort of knowing you're there for at least 3-5 years.
You may of course find a landlord who will allow you in on a licence with less onerous terms and with mutual break periods although these tend not to be in prosperous areas with good footfall etc.
The cost of letting commercial property is so high that most landlords will want the comfort of knowing you're there for at least 3-5 years.
You may of course find a landlord who will allow you in on a licence with less onerous terms and with mutual break periods although these tend not to be in prosperous areas with good footfall etc.
CoolHands said:
I don’t know anything about business but a) who opens shops these days? Most are closing down and b) you’re paying for this bloke to start and run a business. Which is ridiculous. You will lose money, he will lose nothing, when it fails.
According to the OP he's only risking 10% of what the other guy is putting in.Shops aren't a certain fail but very risky for the most part. However estate agents and tattoo parlours are both doing pretty good (although neither line of business is anything I would want to be involved with).
singlecoil said:
According to the OP he's only risking 10% of what the other guy is putting in.
Yeah unless the OP is the one who they will come after for lease costs etc if the business fails and the partner has nothing. In that case it will end up being more than 10%! Plus I think if someone already has a bad track record it’s not a good idea to go in with them. There’s lots of muppets that think they have the latest brainwave but they go from one failure to another.CoolHands said:
Yeah unless the OP is the one who they will come after for lease costs etc if the business fails and the partner has nothing. In that case it will end up being more than 10%! Plus I think if someone already has a bad track record it’s not a good idea to go in with them. There’s lots of muppets that think they have the latest brainwave but they go from one failure to another.
Where on earth does the OP say the partner has a bad track record?He has little income and no assets. That is very different and could be for a number of reasons.
Talk about 2+2 = 5 !!!
CoolHands said:
Hey it’s not my money, so he can go for it! I’m still of the general opinion though - avoid, unless the OP can add extra info ie what is the shop / business etc. He’s putting in 10% but his liabilities can be more than 10% that’s bad risk in my opinion.
The real question is why the business partner would want to bring in another investor (the OP) and dilute their equity for someone who is only offering 10% of the money and who plans to do what sounds like part-time basic admin/bookkeeping/accounts activities.If I was the business partner I would be trying every method possible to find the extra 10% without giving up equity and instead hiring a part-time admin person to do the extra admin work.
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