Couple business plan questions.

MrFesterMrFester subscriber Posts: 1
edited November 2008 in Business Planning
So here`s the deal.  Essentially I am attempting to take over an existing business that is currently failing, thus allowing me to get it for an obscenely low price.  It is currently an internet cafe with an amazing amount of growth potential and is located in a town where there is nothing like it around.  Basically, the people that own it now have limited experience in running a food service establishment and have decided they want out.  What they want to do is essentially turn over ownership of the company to me.  Here`s where my first question lies.  If they maintain titled ownership, what are the IRS ramifications.  Such as I may not change the name, they will pay sales taxes from an account I have to make weekly deposits into.  Other than that, everything falls under my name.  My responsibilities to them is to pay the $800/mo rent and cover all day to day expenses as well as 10% of sales weekly.  Would I still be considered the owner for taxes?  Would it be a sole proprietorship?  With an answer to this I will be able to figure more out.  Thanks in advance for the responses.

Comments

  • slearslear subscriber Posts: 2
    This sounds like a full partnership to me and unless that is what you want and/are agreeing upon, they may have a 55% ownership or more which may allow them to make all the important biz decisions. I would suggest that you talk to an attorney before you proceed.
  • robertjrobertj Tampa Bay, Floridasubscriber Posts: 0 Member
    So here`s the deal.  Essentially I am attempting to take over an existing business that is currently failing, thus allowing me to get it for an obscenely low price.  It is currently an Internet cafe with an amazing amount of growth potential and is located in a town where there is nothing like it around.  Basically, the people that own it now have limited experience in running a food service establishment and have decided they want out.  What they want to do is essentially turn over ownership of the company to me.  Here`s where my first question lies.  If they maintain titled ownership, what are the IRS ramifications.  Such as I may not change the name, they will pay sales taxes from an account I have to make weekly deposits into.  Other than that, everything falls under my name.  My responsibilities to them is to pay the $800/mo rent and cover all day to day expenses as well as 10% of sales weekly.  Would I still be considered the owner for taxes?  Would it be a sole proprietorship?  With an answer to this I will be able to figure more out.  Thanks in advance for the responses.

     
    I agree with Mark - an asset purchase would be in your best interest or you should get indemnity from the owners. 
     
    I guess they want to maintain "titled ownership" so they can be sure you pay them (there are better ways to accomplish this) - but I`m not clear why you would want that?
     
    As to structure (sole proprietor)- it would continue to be what ever it is now. However, I would strongly suggest a different approach that includes setting up a separate business entity.
     
    Send me a PM if you want to discuss the specifics of your situation.
    robertj11/19/2008 11:40 AM
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