HOW SHOULD I TAKE OVER THE FAMILY BUSINESS?
Q: My parents’ business is more or less wound down – they’re pretty much set up for retirement and stopped working seriously on it a while ago. Last week, they got in touch and asked if I was interested in taking it on. It’s a very traditional business supplying to the building trade and, while things are obviously down in that sector, it had a great name within it. That said, there are little or no assets or liabilities after a year of effectively not trading. They’ve said that they’re happy to let me have the business for nothing, which would be a great deal. What’s the best way to go about it?
A: There are a few different ways you could approach this. The least expensive option would be to have your parents give you their shares in the company, and hold an AGM to make you managing director. You can register forms with the CRO for this, or get an accountant to do it.
That option, however, comes with a certain risk. Are you sure that there are no proverbial skeletons in the company closet? You should ensure that all tax returns are filed, and all the CRO paperwork is in too – even if the company wasn’t actively trading, these are regulatory requirements. Five years from now, you don’t want to be on the hook for an error or oversight made by your parents.
For that reason, most people would advise you to start your own company, buying the business name and assets from your parents’ firm for a nominal sum. This comes with a higher up-front cost in paperwork and accountancy fees but it’s well worth the peace of mind, especially if your parents are unsure about anything.
You could, of course, buy the business name as a sole trader – this would cost you next to nothing up front, and give a clean break from the old firm. Unfortunately, however, you’re looking at supplying a sector where bad debts remain common. This could leave you personally liable if something goes wrong.
If there was ongoing trade, there’d be some merit in keeping the old company going rather than unsettling any customers. In that case, we’d urge you to get an independent accountant to do a thorough check of the books before any handover. As it is, however, a new company seems like a far neater way to approach the issue.
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