Business Buyers Guide
“Everything you need to know”

Original written by Steve Timewell from Idealspain

Why Move to Spain?

With the ever increasing costs of living in the United Kingdom and the many negatives that people are facing in their every day lives, it is not surprising that thousands upon thousands of people are emigrating to a country that offers them a better quality of life.

Spain is the top destination for British people looking to emigrate and one of the most popular areas they very often choose is the Costa del Sol. It is hardly surprising that thousands of people make the move each year; cost of living 30% lower than that of the UK, lower taxes, 320 days of sunshine every year, superior medical facilities, good schooling and a great Mediterranean diet and lifestyle!

Moving to Spain is “almost as perfect an environment as it is possible to obtain” acknowledges the World Health Organisation. The weather, the cost of living and the fantastic lifestyle really do make Spain the perfect place to live and work.

You are not going be to cut off your friends and family; in fact you are only 2 ½ hours away and you will receive more visits that you probably want from them! Spain and in particular the Costa del Sol offers you a “home from home”, in terms of  the facilities and shops that you will find and is an ideal destination to bring up a family, run your own business and is perfect for retirement.

Why Buy a Business in Spain?

Buying a business in Spain is not a complicated procedure and the key to the process is to obtain the correct advice and buy the right business.

If you buy a business in Spain, it offers you an affordable opportunity to ‘be your own boss’ and get away from the daily grind with your current employer and you can control your own destiny.

If you run your own business in Spain you will  find a lot less stressful than than is in many other countries, especially the UK and you will actually keep more of the money you make from your hard work due to a much fairer tax system.

Whatever business you buy in Spain, you always have to remember that the success and how much you make is in your own hands. You get out of it what you put in and if you are motivated and prepared to work hard, you will find it financially rewarding and most importantly – enjoyable!

Who can buy a Business in Spain?

Anybody who holds an EU passport (which of course includes the British Passport) can live and run their own business in Spain. You have the same rights and entitlements just as a Spanish person does and if you are running your own business and paying social security, you will be eligible for free schooling for your children and free medical care!

You will need to obtain an NIE number, which is something that Costa Businesses S.L. will assist with your application for. If you do not have an EU passport, you will very likely still be able to buy a business and employ somebody to work in it for you, but would need a work permit to work in the business yourself.

Costa Businesses S.L.  can help and put you in touch with a lawyer who can assist you with
obtaining a work permit if you do not have an EU passport. Please contact us with any questions or concerns relating to this matter.

What Businesses are Available to Buy in Spain?

There are a whole multitude of different businesses available for sale in Spain. You have a choice of Drinks Bars, Café Bars, Music Bars, Snack Bars, Restaurants, Shops, Offices, Supermarkets, Car Hire Businesses, Hairdressers, Service Businesses,  Maintenance Businesses and much more.

The type of business that you buy depends on two main things; the area and wha t businesses are viable and what you feel you are able to run. After speaking with Costa Businesses S.L., we will discuss the different options and about what you think is best and we work with you to show you the most suitable businesses that fit your requirements.

New Business or an Existing Business?

You have the choice of starting your own business from scratch or buying an existing business. When looking at starting your own business from scratch, you have to always remember that there is a far higher failure rate of new business start-ups and many go out of business within the first year if the business plan and market is not erfectly planned.

The other negative to starting a new business is that if you take on new premises, you have to spend money in refurbishing and fitting out the premises for your new business. Not only does this cost money, but you also have the long and drawn out process of getting the necessary licenses from the Town Hall to be able to legally trade. This can take many months and can be very expensive.

If you did want to start a business from scratch, Costa Businesses S.L. can assist with obtaining premises, starting up a company and everything else that needs to be taken care of. If you buy an already established business, you will find that you have trading history to be able to make a more informed decision that the business is right for you.

Also and most importantly, the premises will already be licensed, meaning that the hard work and expense has already been catered for. Remember, that you can change the name, redecorate and change the way that the business trades, but you have a good foundation for the future, existing clientele and a much smaller chance of failure.

Costa Businesses S.L. sell all types of businesses, but we only market and sell businesses that are fully licensed in accordance with local laws – this means that you can trade from day one and you have far less stress and headaches.

So, the simple answer is; always try to buy an established business with licensed premises as this is by far an easier and more successful option. Will I see Accounts for the Business I am interested in?

You will find that the owners of businesses in Spain will normally be able to provide you with some financial information about any business that you enquire about. We are often sent emails from our clients asking for copies of accounts and banking information on a particular business.

Due to confidentiality for the seller of any business, all private information such as accounting and trading information is usually available upon a viewing of a business and we will work for you to obtain as much information as possible. One point you should always consider is that no matter how much or little a business is taking, you should look from the angle of “How much could I make with my ideas?” Many businesses can be dramatically changed to be improved with a few
simple changes. Costa Businesses S.L. always offers honest and impartial advise on the performance of any business that we are showing you.

What is the difference between Leasehold and Freehold?

Freehold
When you purchase a freehold business, you are buying the business, fixtures and fittings and the building. It is just as if you are buying a property in the UK – you own the whole building, bricks and mortar.

You can obtain a mortgage to purchase a commercial freehold and banks will normally loan 50% of the valuation that the bank give the building. Costa Businesses S.L. can assist with mortgages and valuations.

You will not pay any rent as you will own the physical property; you would just pay a mortgage, if applicable. If you purchased a freehold, you would also be able to sell a lease on the property where you would get a lump sum for the lease and then a monthly rental income.

Leasehold

By far the cheapest, easiest and most popular way to buy a business in Spain is to buy a leasehold business.  When you purchase a leasehold business (known as a Trespaso in Spanish) you buy
the lease for the premises and ownership of all of the contents, fixtures and fittingsthroughout the duration of your lease term. So if you see a leasehold bar for sale, the advertised price will be for the lease on the premises, the goodwill of the business and all of the fixtures and fittings, which will be documented on an inventory when you sign for the business upon completion.

Here are some leasehold facts:

Lease Length
When you buy a leasehold business, Costa Businesses S.L. always ensures that all of our clients are given a brand new lease contract direct from the landlord. The length of the lease will be detailed on the business advertisement for each business and the agreed length will be specified on your lease contract upon completion. The most common lease length is 5 or 10 years, but sometimes a landlord will offer 15 or 20 years or on rare occasions, a lifetime (endless) lease can be obtained.

Deposit
When you purchase the lease, you will usually be required to pay a security deposit of two months rent. This deposit is returnable to you in the event that you sell the lease. You will also be required to pay the first months rent in advance.

Rent
The stated rent in our business advertisements are the current rent that the existing owner is paying. Always remember that the rent can and often will increase for the new tenant. By law, a landlord can increase the rent up to a maximum of 20%, however, this hardly ever happens as the landlord wants to receive a regular income and to inflate the price too high will only result in a failed business and an empty premises!

As a rule of thumb, Costa Businesses S.L. suggests that you allow for an average of 10% increase to calculate what your new rent would be. Many landlords only increase the rent by a couple of percent. To be safe, Costa Businesses S.L. suggests that you also allow money for stock and some back up money for some rent payments just encase it takes a couple of months to get off the ground. The rent that will be on your lease contract will need to be paid each month between
the 1st and the 5th day.

This will usually be by direct debit or cash paid into the bank. Throughout the duration of the contract the rent will remain fixed and the only increase will be once per year by the rate of inflation, which is a couple of percent.

Rent Retention
You will also be required to pay retention every three months. This is not additional money, but you withhold the tax that the landlord pays the tax office in Spain and pay this on his behalf every three months. This tax is 18% of the Rent amount.

An example of this would be:
Rent 800€. The VAT on the rent is 16% (128€ – which you claim back against your stock and supplier purchases, which your Gestor will do for you) so, the rent and the Vat will total 928€. You then deduct 18%, which is 167.04€ and pay the landlord 784€. Then every three months, on behalf of the landlord to the tax office, you pay 167.04€ x 3, which totals 501.12€. The three months VAT of 128€ per month, you claim back against your purchases. So, you do actually end up only paying 800€ rent.

This is quite a complicated system to explain, but Costa Businesses S.L. believes that our clients should know exactly how this system works. Our team will be happy to explain this with you in more detail, please feel free to ask about this if you have any questions.

Lease Renewal
The contract will usually state that the lease is renewable and a new term can be taken at the end of the first one. You will not be required to pay any extra deposit, nor will you be required to pay another lump sum for the lease. You should be aware that the rent can be increased by the landlord by 10% to 20%, but most landlords are happy with a good paying tenant and it is very common that the rent is left as it
is or with a very small increase.

Selling the Lease
As the leaseholder you have the right to sell the lease at any time that you wish. Under the terms of the lease, you will be required to pay the landlord 10% to 20% of the selling price. This is standard practise in Spanish leases and is applicable to all lease contracts. You can often negotiate a lower amount to pay the landlord and this is something that Costa Businesses S.L. would be happy to help you with. Of course, you will also be required to pay a commission to the agent who sells the business for you.

Lease Security Requirements
You will normally only be required to pay the landlord a two month returnable security deposit. On rare occasions where there is a high value of equipment being provided in the premises, some landlords will require a larger deposit. It can also rarely be the case where a bank guarantee can be required, where you will need to deposit some money in the bank to cover any non-payment of the rent. This very rarely happens and in such a requirement, Costa Businesses S.L. would notify you of this.

Insurance
Under the terms of the lease contract, you will be required to insure the premises for fire and theft. The building will be insured for the benefit of the landlord and the contents will be insured for your benefit. Insurance in Spain is very much lower in cost that in the UK and Spanish Commercials can put you in touch with a reliable, local company to obtain your insurance.

Legal Disputes
The lease for your business will be prepared and signed in Spanish and as such is bound by Spanish law. In the event that you have any disagreement with the landlord over any matter relating to the lease contract, this would b e dealt with by the Spanish Courts. The landlord has rights as he owns the property and you would have rights as the leaseholder.

Buying Procedure
Costa Businesses S.L. works with you every step of the way to ensure that you find the right business at the right price. Usually, we communicate with our clients by email and telephone and once you decide to visit Spain, we will spend as much or little time as you want us to in order to show you everything about the areas of interest and suitable businesses.

Once you have found the right business and you are sure you want to go ahead with the purchase, this is the procedure:

Reservation Deposit
The initial thing that you need to do once you have found the right business and the price is agreed is to remove it from the market. Under Spanish law, a business or property is still available for sale until such a time that a deposit is paid.

You will need to pay a reservation deposit of 10% (or 6000€ if purchase price is less than 60,000€). Once this is paid – you have the business reserved throughout the duration of the option contract.  We will accept deposit by credit card or bank transfer.

The deposit that we take is retained in our client account and we do not pass this deposit to the seller, just encase there are any problems, which means we can easily return your money to you.
If you are coming to Spain with the intention of buying a business, it is always a good idea to bring your credit or debit card as this means you can make  a decision if you see what you are looking for and it is a fast and secure way to reserve your business.

Option Contract
The Option Contract will be signed by yourself at the same time that you pay the deposit. This contract is between yourself and Costa Businesses S.L. and the terms of the purchase are stated on the contract, including the agreed price and the completion date. You will be required to
complete the sale within the agreed time. This is usually 30 days, but by mutual agreement with the seller, a longer completion time can be negotiated.

The seller will sign an option contract agreeing to the same terms and at this point, the seller cannot sell the business to any other party, regardless of how much money they offer him!

Legal Checks
During the time that you pay the deposit and complete on the sale, your appointed Gestor (lawyer/accountant) will make the necessary checks on the business that you are buying to ensure that all utility bills are paid up to date and that there are no debts on the business that can come back onto you. They will also work with the landlord and will draw up the new lease and check all of the terms are acceptable for you and are as agreed.

Your legal representative will also arrange for your NIE numbers, we will open your bank account and deal with any other matters that need attending to.

Completion
A mutually agreeable completion date will be fixed and in advance of this, you will need to transfer your money to your Spanish Bank account (which you will have already opened) and a meeting will take place between the seller, the landlord and yourself with us and your Gestor.
The lease contract will be translated to you by the Gestor who will make sure that everything is in order for you and upon this, all parties sign the new lease, money changes hands and you walk away as the new owner of the business with the keys!