Is it ok to take over an already established business?

[Mensur]

Is it ok to take over an already established business with the entrepreneur visa? I mean say I bought a business that is already established and already doing well or fairly well. Then I use the £200,000 to spend on this business, is this ok? Because an entrepreneur is defined as a person who establishes a NEW business venture? If I were to buy and then run an already established business, would this be ok?

[attahaas]

Is it ok to take over an already established business with the entrepreneur visa? I mean say I bought a business that is already established and already doing well or fairly well. Then I use the £200,000 to spend on this business, is this ok? Because an entrepreneur is defined as a person who establishes a NEW business venture? If I were to buy and then run an already established business, would this be ok?

This topic is already covered here buying a running business for entrepreneur visa

[Mensur]

Thanks for the response attahaas,

I realise that Franchise's can be purchased, but what I want to know is, is it allowed to purchase(buy) an independently owned small business that's already set up and doing well? Like for example, buying an independently owned corner shop off someone and then continuing to run it yourself?

[attahaas]

Thanks for the response attahaas,

I realise that Franchise's can be purchased, but what I want to know is, is it allowed to purchase(buy) an independently owned small business that's already set up and doing well? Like for example, buying an independently owned corner shop off someone and then continuing to run it yourself?

Yes, you can. It doesn't matter as long as you are investing the stipulated 50K or 200K into the business and creating a NET increase of 2 new full-time jobs. Since it's an existing business, there must be existing employees, so you must make sure you create additional jobs or jobs in excess of the existing ones.

You must also make sure you don't pay the value of the business directly to the previous owner. You better enter into an agreement where you invest the money first into the business (company's bank account) and then the previous owner can systematically withdraw his money from that business account.

[Mensur]

Thanks again for the reply attahaas,

Thanks for answering my question. However your response has given me two more different questions.

" creating a NET increase of 2 new full-time jobs. Since it's an existing business, there must be existing employees, so you must make sure you create additional jobs or jobs in excess of the existing ones"

How does this actually work? I mean if I take over a business and there are already 2 employees working there, what if I sack them when I take over and replace them with 2 other workers? Or if I sack them and hire 2 other workers and change their job description slightly. If the job description changes then it is a different job surely? Also I'm not going to necessarily maintain or provide the same job opportunities for employees/workers when I take over am I. I'm not going to necessarily run the business the same way the previous owner ran it. It seems to me that this is open to a bit of manipulation.

"You must also make sure you don't pay the value of the business directly to the previous owner. You better enter into an agreement where you invest the money first into the business (company's bank account) and then the previous owner can systematically withdraw his money from that business account."

What I think I understand from this is your trying to say that the £200,000 investment should not be spent on purchasing the existing business. However, say I have £350,000 (£200,000 of which is my investment) and I pay £150,000 to buy the existing business and I use the £200,000 to invest in the business. Surely this is ok?

[Mensur]

You know why can't I pay the value of the business directly to the previous owner? Especially if I have the money to do so? Getting into an agreement where I invest my money into the existing business that the owner also still owns seems a bit risky to me. I'd have to have an agreement in writing that he agrees to withdraw his money from the business after a small agreed amount of time and that he will eventually hand all the rights of the business to me after he has withdrawn all his rightful(and agreed) money from the business.

[attahaas]

Regarding creating 2 new positions, you can't sack the previous employees and employ 2 new workers in their position, and show you have created new positions. The UKBA is actually looking for a net increase of total number of working hours provided and not the number of people per se. If you sack 2 and take 2 new then the UKBA sure will not consider it as NET increase because you are NOT adding to creating NEW employment. Obviously, the older business needed employees to run it. Also, even if you change the description of the job, it really doesn't matter, because you are supposed to create NET increase in working hours that what was there previously. If you do need to sack 2 older employees, you must hire 4 new ones. While you apply for extension, if the UKBA even gets a hint of manipulation you are surely not going to get the extension. It's simple logic.

What I think I understand from this is your trying to say that the £200,000 investment should not be spent on purchasing the existing business. However, say I have £350,000 (£200,000 of which is my investment) and I pay £150,000 to buy the existing business and I use the £200,000 to invest in the business. Surely this is ok?

Surely it's OK, but why do you want to spend extra 150K when you can include the same money as your investment. As I said, put that money in the business and ask the previous owner to take from the business account. If you have the extra money, it's up to you.

[Mensur]

Thanks again attahaas,

I understand what your saying about the employees and if it's the rules then they must apply. However, many businesses have employees working for them for a while and then the business owner for example gets rid of them because he thinks the business can actually run(and save on money) without having the employee(and his job position). At the end of the day, I understand from what your saying is that there must be a NET increase in the number of employees that the buyer must employ in relation to the number of employees employed at the time of purchase.

Regarding your last comment
"Surely it's OK, but why do you want to spend extra 150K when you can include the same money as your investment. As I said, put that money in the business and ask the previous owner to take from the business account. If you have the extra money, it's up to you."

Obviously I understand the logic behind what you are suggesting. But how easy is this to do? How quickly can the other party withdraw his money after the agreement? If he withdraws all his money straight away after your investment, wouldn't UKBA get a hint of suspicion and think that this might be manipulation? Also everything would have to be in writing with the other party for this agreement were to go ahead. I would be interested to see how many other people have done this.
Moreover, what if a British citizen relation of mine bought a business. Then a few weeks later I invested and put my money(I'm presuming it has to be all £200,000 of it) into the business. Then he withdrew all his money from the business. Would this be ok?

[attahaas]

Thanks again attahaas,

I understand what your saying about the employees and if it's the rules then they must apply. However, many businesses have employees working for them for a while and then the business owner for example gets rid of them because he thinks the business can actually run(and save on money) without having the employee(and his job position). At the end of the day, I understand from what your saying is that there must be a NET increase in the number of employees that the buyer must employ in relation to the number of employees employed at the time of purchase.

Regarding your last comment
"Surely it's OK, but why do you want to spend extra 150K when you can include the same money as your investment. As I said, put that money in the business and ask the previous owner to take from the business account. If you have the extra money, it's up to you."

Obviously I understand the logic behind what you are suggesting. But how easy is this to do? How quickly can the other party withdraw his money after the agreement? If he withdraws all his money straight away after your investment, wouldn't UKBA get a hint of suspicion and think that this might be manipulation? Also everything would have to be in writing with the other party for this agreement were to go ahead. I would be interested to see how many other people have done this.
Moreover, what if a British citizen relation of mine bought a business. Then a few weeks later I invested and put my money(I'm presuming it has to be all £200,000 of it) into the business. Then he withdrew all his money from the business. Would this be ok?

Now, you can't compare the business set up by a Tier 1 Entrepreneur with "many other businesses" because they don't have to satisfy the conditions of the Tier 1 Ent visa. This visa is specifically modelled to CREATE job opportunities, not to replace existing one. It is all about the value the Entrepreneur is adding to the UK economy as a whole.

It is very easy to do, and it is not manipulation. Just talk to any accountant, he/she will explain you. But, sacking 2 old employees and hiring 2 new ones and claiming creation of 2 new jobs is clearly manipulation.

Yes, it would be perfectly alright if you takeover your British relative's business the way you said.

This is the same logic that applies when you buy a car in your name vs. in your company's name. For a car bought in a person's name you can't claim tax deductions for the expenditure or depreciation deduction after a year from income to save tax. But, when you buy the same car in a company's name you can deduct the cost and it's depreciation eventually from the revenue, and also save tax. In either cases you would be the same person using it and it's YOUR money. What differs is the channel through which the expenditure is made. And it is not manipulation to buy a car in your company's name.

What's the catch? There is no catch here. It's an incentive to encourage entrepreneurs, hoping to create jobs. Also, when you establish a business you have to pay fees, charges and taxes to the government periodically, which otherwise would be absent in an individual situation.

[Mensur]

Ok one more last question, so hypothetically speaking, would it be ok for my British relative to buy a running business outright. Then a couple of days after he's bought the business, I put my money in the business. Then he(my relative) withdraws all his money from the business account. If all this happened in the space of a week, would UKBA be fine with it?

[attahaas]

Ok one more last question, so hypothetically speaking, would it be ok for my British relative to buy a running business outright. Then a couple of days after he's bought the business, I put my money in the business. Then he(my relative) withdraws all his money from the business account. If all this happened in the space of a week, would UKBA be fine with it?

I don't see why it can't be done as long as it is black and white.

Having said that, it's better to consult an immigration lawyer and/or accountant to double confirm this. We can never be sure if there is something in the fine print that we might miss.

If you or anyone else in this forum finds anything otherwise, please share the info here. It will be useful for everyone.

[Mensur]

Thanks attahaas and I will let people know if I find out anything that is relevant I shall let people know. Thanks again for your advice and info.

[Mensur]

Hello attahaas,

I just want to confirm with you the hypothetical scenario I put to you yesterday. If a British relative of mine bought a running business outright say for £150,000, which would make him the owner. Then I invested my £200,000 into his business(company's bank account). Then my relative can systematically withdraw his £150,000 from the £200,000 I put into the companies bank account, as this £200,000 is the companies money. So that would leave £50,000 in the companies bank account after my relative takes all of his £150,000 out of the companies account. Is this correct and allowed? Please verify this scenario and please give me your opinion.

[attahaas]

Hello attahaas,

I just want to confirm with you the hypothetical scenario I put to you yesterday. If a British relative of mine bought a running business outright say for £150,000, which would make him the owner. Then I invested my £200,000 into his business(company's bank account). Then my relative can systematically withdraw his £150,000 from the £200,000 I put into the companies bank account, as this £200,000 is the companies money. So that would leave £50,000 in the companies bank account after my relative takes all of his £150,000 out of the companies account. Is this correct and allowed? Please verify this scenario and please give me your opinion.

Mensur, technically it should work. All you are doing is taking over an existing business, doesn't matter who the previous owner is. And, it is OK for entrepreneurs to take over as per the guidance. As long as you conform to the guidelines for extension, it should be OK.

There are not many people on this forum who have gone through the entire 3+ years and applied for extension and were successful and had experience with taking over. So, I can't stress this enough, it's always best to seek professional advice (immigration lawyer/accountant) to double confirm this case.

Just the other day, another forum member 'entrepreneur123', showed a clause on this thread Cannot understand this new rule, that even if a self-employed entrepreneur gets paid through his company from a client he would work for, it would not be considered for extension if it just amounts to replacement/hiring of a job at the client. This shows, even if the logic is correct, if the authorities don't consider it what we expect it to be, we would be at loss. So, again, PLEASE consult a professional!

Regards,
Krishna.