Buy an Existing Business in Spain
If you are thinking about opening a bar, a restaurant, a shop or any other business where you don't necessarily need to start the company from cero it might be a good idea to buy an existing business.
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The advantage of buying an existing business in Spain is that many licenses, work contracts, permits etc. are given directly to the company and doesn't expire just because you change the ownership of the business. This can save the new owner a lot of time and resources not having to wait for the necessary licenses and contracts for employees.
Even though you don't find exactly what your are looking for it is normally still cheaper and much faster to renovate an old establishment (although you will need some construction permits depending on what you want to change) than to construct a new one and obtain all the necessary licenses.
If you have decided that buying an existing business is the best solution to enter the Spanish market you can find a few recommendations and things you should be aware of below.
Freehold Vs. Leasehold
When buying an existing business in Spain you have two options - to buy a Leasehold (Traspaso) or a Freehold business.
The main difference between the two options is the initial investment required and the legal ownership of the business.
When you buy a leasehold the initial cost will be much lower than buying a freehold but you will have to pay a monthly rent as long as the lease last. This rent will be fixed over the lease period and only upgraded with the official inflation each year.
As to the legal ownership the buyer of a freehold will own the establishment whereas the buyer of a leasehold will be responsible for the maintenance and running the business but when the leasehold finish he will not be the owner of the business (although some leasehold contracts gives an option to buy the establishment or lease it for another period at the end of the leasehold).
Leasehold
In general it can be recommended to start with leasing a business if you are planning to set up your first company in Spain - like a restaurant or a bar. The main advantages with a leasehold (apart from the lower initial investment) is that it is a fast and easy way to get started (it only takes a few days to arranges a leasehold contract) and that it is also easy to get out again as the buyer always has the right to sell the leasehold to a third party.
As you can always sell the leasehold it is a good and safe way to learn about the business and to decide upon buying a freehold or getting out of the market. If you decide to sell the leasehold the owner is entitled to a percentage of the sales price (normally between 10-25%) but you can sell the leasehold at whatever price you choose.
There exists different forms of leasehold contracts but most businesses are leased from 5 to 25 years on a renewable lease. When you sign the leasehold contract you will normally have to pay 2 months rent in deposit plus the first months rent. Thereafter the rent will be due to be paid monthly upfront.
As you are not the owner of the business you should be careful about making major changes to the business premises without getting a written permission from the owner.
Freehold
If you decide upon buying a freehold the process will be similar to purchasing a property (you will have to sign a new title deed with the public notary, pay VAT on the purchase, register the purchase of the property, etc).
The arrangement of buying a freehold is both more expensive and takes a longer time to finish than a leasehold contract. The major advantage is that you will be the owner of the business and the property. This means you don't have to pay a monthly rent (only the mortgage if needed) and you can even sell the establishment as a leasehold if you get tired of the business.
If you have decided that buying or leasing an existing business is the best solution to enter the Spanish market you can find a few recommendations and things you should be aware of below.
Recommendations
First of all we can recommend to take your time and to look at several businesses before deciding upon one. The prices can vary a lot from place to place and by looking at different options you will be able to compare prices, locations and quality between different establishments.
Before deciding upon one business you also have to take into consideration the number of competitors in the area, the number of possible customers (and not only in the tourist season) and the taxes paid in the province.
If you have found a business you like you should arrange for a second visit. At a second visit it is recommended to bring professionals who can go through all the important installations (water, gas, electricity, etc).
At this stage it is also a good idea to contact the former owner and to spend some time in the area. This how you can learn why they want to sell and get a better understanding of the business. You might even be able to use the former owners experience and contacts to establish your own group of clients.
Before you sign any contract there are still a number of important things to clear out.
Although many licenses, contracts etc. are transferred to the new owner you still need to make sure that all the paperwork are up to date and in order. When you buy an existing business you don't only inherit the permissions but also all outstanding debts and unpaid bills etc. It is therefore very important to make sure that all the papers (licenses, employees contracts etc.) are in order and that the business has paid all taxes, wages and outstanding debts. Otherwise you as the new owner will be reliable economically and legally.
When you are sure that all the papers are in order you have to sign a purchase contract and the new title deed (if buying a freehold) that will transfer the company into your name. The tittle deed is only valid if signed by a public notary and is the only official way whereby you become the legal owner of the company.
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