Buying a business

Buying a business in Tenerife needn’t be stressful if you do things properly. Employing the services of a good lawyer is essential, after all you wouldn’t buy a business anywhere else in the world without professional advice, and Tenerife is no different. There are many Gestors (lawyers) on Tenerife with very good reputations.

Many business entrepreneurs have succeeded in creating great businesses for themselves in Tenerife that provide a good service or product to both visitors and residents. Bars and restaurants have always been popular businesses that a lot of people aspire to owning, but there are other opportunities for people who are prepared to work hard.

Property management is a popular business on the island. Those business entrepreneurs who had the foresight to see that Tenerife was an up and coming holiday destination years ago have been buying houses and apartments with the sole intention of providing accommodation to visitors.

These properties need maintaining on a weekly basis, which is where the property management comes in; they provide the cleaning, maintenance and general running of the property.

A good business needs solid foundations, so be sensible about the type of business you want, if you have never owned or run a bar or restaurant before, have you got what it takes to make it work? What will make visitors to Tenerife choose your bar, over the one next door? Can you provide something unique and are you prepared to work long hours?

What qualifications and skills have you already got and how could you put them to use in Tenerife? Do you want to provide a service to the holidaymakers or the residents or both?

With sensible planning and hard work, almost any business can be successful.

Most of the businesses in Tenerife are run from premises that are owned by a third party, so you are only buying the business or Traspaso as it is known in Spain. You will have to pay rent to the landlord for the premises. If the business is operating it should have an Opening Licence (licencia de apertura), if no licence is available at the premises and no official application is available then the business is not legal. However you could still buy the business, but first find out how much it will cost for the opening licence and negotiate the price of the business accordingly. If an application for the licence is pending ask your Gestor (Spanish lawyer) to find out why it has been delayed.

You must get a copy of the Rental Contract to ascertain whether the seller has the right to sell the traspaso and whether the landlord is entitled to a percentage of it, how long the lease has to run and is it renewable, what fittings are included in the sale, who pays for the utilities such as water, electric, refuse collection etc and what other terms you must comply with as a tenant.

Negotiate the price of the Traspaso, if you pay too much and use up more capital than you intended you could end up killing a potentially successful business. Bear in mind there will be set-up fees to pay, your gestor should be able to give you a rough idea of the costs involved in buying a business.

It is a legal requirement that the landlord must be informed that the tenancy is changing. Your Gestor should do this for you, don’t rely on the seller. You will need to agree with the landlord any changes that are required and agree on the rent.

Make sure you get a copy of the Contract of Sale before you sign it and make sure you read it properly. The contract should have details of every item that is included in the sale, terms and timescales and a guarantee that the business is free from debts and other liabilities.

The signing of the contract must be done at the Notary Office otherwise you could be challenged at a later date about your ownership of the business and you may not be able to claim a tax allowance on your initial capital outlay. Also, get copies of any other licences, electric bills, refuse collection payments and anything else you think is relevant.

Your Gestor should talk you through the Tax system and advice you which system is best for your circumstances. Unless you have a good knowledge of the Spanish language and are able to speak it fluently, it is advisable to use a Gestor to deal with the taxation and accountancy of your business.

You don’t need to be a big business entrepreneur to succeed in Tenerife. Provide a good service, work hard, enjoy what you do and have fun!