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Business Structure

LTD company purchasing a second retail outlet selling the same items, what is best set up?

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 My client is wanting to set up another shop in another village selling the same things and they have asked what best structure would be.  Just keep as same LTD company but they would lose Small Business Rates Relief or they have mentioned a subsidiary or LLC or setting up another LTD company.  Would they lose this relief anyway as they would be connected companies?  I know they would be connected for VAT so that's not an issue.  Any advice on advantages / disadvantages of different structures would be great

Thanks in advance

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the sea otter
By memyself-eye
10th May 2021 12:48

why would they lose SBRR - it's per property.

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Replying to memyself-eye:
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By Wanderer
10th May 2021 12:59

No, if more than one property occupied there's additional conditions and it's easy to lose all SBRR.

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By paul.benny
10th May 2021 13:56

How much is SBRR worth to client? And how does that compare with the additional costs and bu99eration of having more than one entity?

Like as not they'll have the same suppliers and doubtless some will invoice shop A for goods supplied to shop B and vice versa. Not to mention proprietor transferring stock or asking staff from one to work in the other. etc

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Replying to paul.benny:
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By SUZANNE2406
10th May 2021 14:30

Hi Paul,

I will have to ask that question, do you know if there are any other advantages to setting up as a subsidiary or LLC? It is just a small bookshop and I can't see there would be anymore benefits to having it seperate but just wanted to ensure I'm not missing anything.

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Replying to SUZANNE2406:
ALISK
By atleastisoundknowledgable...
10th May 2021 15:11

Isn't LLC just an American term?

I think that you mean that the options are :
a) a subsidiary limited company;
b) it's own unconnected limited company; or
c) held within the same company?

The Balance Sheet of the current company and the profitability / potential liabilities of the second bookshop will be relevant.

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Replying to atleastisoundknowledgable...:
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By SUZANNE2406
10th May 2021 17:15

yes sorry those are the 3 options.

They currently don't owe any creditors other than HMRC, so I don't think it would be necessary to have it's own legal entity from that point of view

Wasn't sure how small business rates relief worked, would they be classed as connected company? so wouldn't qualify even if it was a seperate legal entity?

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Replying to atleastisoundknowledgable...:
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By SUZANNE2406
10th May 2021 17:15

yes sorry those are the 3 options.

They currently don't owe any creditors other than HMRC, so I don't think it would be necessary to have it's own legal entity from that point of view

Wasn't sure how small business rates relief worked, would they be classed as connected company? so wouldn't qualify even if it was a seperate legal entity?

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Replying to SUZANNE2406:
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By paul.benny
10th May 2021 16:18

Sometimes business owners will operate each branch as a separate legal entity. This can mean that if one fails, it's easier to walk away without the landlord and other creditors having recourse to the entire business. That only works if there are no cross guarantees from other companies or personal guarantees from owner.

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paddle steamer
By DJKL
10th May 2021 16:55

Up here never managed to find out how small business relief works with companies in groups, I did once have a family group of clients with five different partnerships for their five shops and did once try to find out as they wanted to incorporate into a group, but local authorities do not seem to publish anything meaningful re their interpretation of what arrangements work and what do not re RV aggregation.

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Replying to DJKL:
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By Wanderer
10th May 2021 17:29

Seen it raised before on UKBF. No one came up with a definitive reply. If it is the same company or individual operating two separate businesses then definitely regarded as one person.
Operating two different companies, albeit under common control, seems to work but I’ve never read the legislation so that would be the point of call.
Quick read of this:-
https://www.legislation.gov.uk/uksi/2012/148/made
refers to the ‘ratepayer’ so that may suggest that two (even though connected) companies may be okay to each qualify.

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