Buying a Business

In Spain when buying a business, the tenure will either be freehold or leasehold. There are advantages and disadvantages to both. Get financial and legal advice on tenure issues.

Leasehold businesses
In Spain leasehold is called a “traspaso“. The leasehold sum is the amount of money paid to the existing owner, to take over the business. The new owner will then take on the right to re-sell the business whenever he or she desires.

Understandably, given that you are not buying property, a leasehold business is much cheaper than freehold and more accessible to most investors. However, you can only change the use of the building or make alterations; with the prior approval of the leaseholder so operating in a leasehold property can be far more restrictive.

Freehold business
Although more expensive initially, you can make any changes you like and property normally appreciates in value over time. When you sell, however, you have to pay considerable capital gains tax.Let’s say you buy a freehold business and then wish to do something else, you have the following options:
Rent the premises by selling the business (and charging a leasehold-traspaso for the license, machinery and business).

Rent the premises to a manager (keeping ownership of the license and machinery). Perform a sale and leaseback (whereby you sell your premises but make an arrangement to rent it back for a good rent for a number of years).

Or sell off both the premises and the business to a new business owner.