client being given a business

[oceanlovin'ea]

I need help to think through all the possibilities and problems that could arise from this situation.
My client worked in a small retail store last year. Was gone out of state for a few months but is back now. The lady she worked for has several businesses and she says she doesn't have to be in the store all the time and really doesn't want to have store anymore. She wants to GIVE it to my client. Not sell it to her, but GIVE it to her.

What are some of the things we should be looking at as far as her taking over this business? I think she should ask to see profit and loss statements to see if it is a profitable business.
It is in an expensive shopping center so I think the lease agreement would be another consideration.
Another question would be if she is giving her the whole corporation (?) including name or just mdse and equipment.

Thanks for your help.

Linda, EA

[S T]

An owner is that benevolent

Seems like maybe a couple of first clues

Check on the Lease - Does current owner owe back lease payments - can lease be assumed or can lease be re-negotiated to a better lease amount and term.

Check with Vendors - to see outstanding payables on merchandise that has already been delivered and possibly sold.

Check with utilities to see if current owner is behind in utiltity payments

Check to see other outstanding loans that might be attached to the business

Yes profit and loss statement, but I really think you need some type of an Accounts Payable and copies of the Bills as well.

Not sure on the Corp issue since it seems it would be -0- $ changing hands, and maybe your client would not want the old/current owners Corp and liabilites. What about back Corporate Taxes? Can you do a Corporate Lien Search in Fl (is that the UCC search?)

Just a few thoughts

Sandy

[Gary2]

I'd consult a lawyer on the issue of the corporation. It might make much more sense to take the assets (including the DBA name, goodwill, etc.) without taking the corporation, precisely to avoid any unknown liabilities.

[oceanlovin'ea]

It is actually a consignment shop. So there is probably not much as far as vendors. Of course, there are the people who will have to be paid when mdse is sold.

Good points to think about.

Linda, EA

[ChEAr$]

If the present owner has real problems,e.g.back rent, other loans which might encumber the personal property and inventory, this whole deal would give new meaning to the old phrase:
"Giving her the business."

[JohnH]

If the present owner has real problems,e.g.back rent, other loans which might encumber the personal property and inventory, this whole deal would give new meaning to the old phrase:
"Giving her the business."

or it could be a case of the present owner putting the "con" back in "consignment."

[oceanlovin'ea]

I will make sure that she checks for any outstanding debts against the business. I know the lease might represent a problem. I think she said the lease is up in February. She thought the owner had to pay a very large amount down which she would not have. The rent is quite high in that place and she said a lot of people have moved out. If the lease could stay in the current owner's name until lease expires that would be beneficial.

I am of the opinion that she just get the assets of the business....shelving, racks and merchandise rather than the whole business. I think she should see the tax return to see if there has been a profit showing.

I guess I should add that the lady might just trying to help out my client/long time friend. Her husband died a year ago and they were living in another state. He was ill for a very long time and they exhausted all they had before he died. She couldn't leave him alone so it was hard for her to work. After he died, she moved back here where her sister and her son lives. She got this job in this store and worked there for several months before she went north for the summer. The lady called her while she was gone and wanted her to come back to work for her and then decided to give her this business. So she might not have hidden motives for what she is doing. But it still bears checking out thoroughly.
Linda, EA