A client wants to protect his business.
A client's Ltd. Co. business involves retailing same trade from two small shops. A new lease is due to be signed in one shop where the rent is substantially higher than before and could bring the whole business down if not profitable. The client would close the unprofitable shop if found to be unprofitable further down the road.
Looking therefore at splitting the business into two separate Ltd. companies.
Are there any pitfalls into setting up newco and transferring stock to it for the profitable shop to trade under newco?
A possible bonus of a separate company is to be able to attract small business rates relief as one shop would qualify although unsure if two limited companies are treated as same business if common director/shareholders.If one owned by husband and the other by wife then treated as separate?
Obviously if separate companies and losses made in one shop then no loss relief available to the other shop and unutilised losses wasted..
Any help gratefully appreciated.
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Have a holding co
If each shop is a separate company, and they are wholly owned by a third company, losses can be transferred between them as they now form a group.
You'll need to do a full CT600 in order to do the elections for this.
Surely the key question is will the landlord be prepared to lease the shop to a new shell company?
He is obviously happy leasing to existing company but may well baulk if the perceived security he is getting from the existing tenant is no longer there. The norm I tend to apply, when such a request is made to us (as landlords), is to look for the new company to be guaranteed by the old company or the owner as an individual, but of course that does not fit with your client's perceived requirement.
In practice the landlord may agree to the proposal if he has no other prospective tenant, however if his solicitors/he understands what is being asked they may well refuse.
The key will likely be can he get a safer tenant for the unit in the current environment?