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cafe business $25 000 then three year lease - is that ok?

hi, i am trying to buy/rent an existing cafe in kyiv, the current tenant wants a premium of $25,000 to leave the business and let me take over, i can then sign a 3 year lease with the owner, and go from there. is there any advice anyone can give me to be aware of?

There could be many advices because there could be many problems with this business. It may have debts, be mortgaged, have legal actions,  etc. My two primary advices are to retain a lawyer and an accountant and not to buy it blind.

i have a lawyer, the property will be a lease for 3 years, its already established business

Check current sales, check taxes payments in the past. This will give you an idea.

Taxes payments? How do you mean?

guitarman3 :

Taxes payments? How do you mean?

Your lawyer and accountant must know all this and do all the job. It all depends on the structure of your deal. If you buy a company then it has paid taxes and you should make sure the company does not have tax debts, tax law suites or tax complaints.
If you buy merely a franchise then you should check the franchisor's accounting to make sure this business does generate income you expect. In Ukraine it is common that official accounting differs from real accounting.
You also can buy only a trademark, or a premises with equipment, or only equipment... It all depends on structuring the deal.

In addition, taxes are related to sales...the higher taxes it monthly pays, then sales are good but if cafe pays low taxes (obtained for sales), then you will have your answer...

Epatias :

In addition, taxes are related to sales...the higher taxes it monthly pays, then sales are good but if cafe pays low taxes (obtained for sales), then you will have your answer...

In theory and/or in some another country. As I mentioned above, in Ukraine it is a usual practice to decrease official sales so the profit be less and taxes low. That is why official accounting statements do not always depict a real picture.

the current tenant is who i am buying the business off, I'm assuming i will have a new 3 year lease with the owner?
so i should check there are no debts, or tax debts with this business?

guitarman3 :

the current tenant is who i am buying the business off, I'm assuming i will have a new 3 year lease with the owner?
so i should check there are no debts, or tax debts with this business?

It is impossible to answer to your questions without knowing who sells what.

From your last message I understand that the seller rents a premises of the cafe. This means you should make sure the landlord will also lease the premises out to you on terms you need. Because the seller can sell you what you need but the landlord is not obliged to conclude a lease contract with you.

I still do not understand what you buy. If the seller is a private entrepreneur (often called "FOP" or "SPD") then it sells merely his assets (furniture, items of decoration, appliances etc) and maybe a trade mark. In general he sells goods. So his obligations and liabilities are not transferred to you. If the seller runs the business as a limited liability company (called "TOV") then you might buy this company together with all its goods, obligations and liabilities. BTW in this case you will not need to conclude a new lease contract as it passes to you together with the company.

Hi,
I would be very cautious  if I were you.Unless you know the language  and know some honest lawyers  I would stay  away from deals like that.
Mike leonard(Odessa)

My advice at present is to save or invest the 25k in a secure country ...only invest it in this venture if it's pocket money for you and you don't mind not seeing it again.

Hello :)

From my own experience and from my Ukrainian Friends in banking, tax, and law STAY AWAY from this deal.  If you do not speak the language NOR have an intimate understanding of the lack of the Rule of Law, the bribing of judges, and contracts that are questionable or never enforceable stay away.  As a foreigner you are a walking Bank-O-Mat (ATM) with sucker written all over your forehead.

Sorry to sound so down but I have been here long enough to see this happen over and over again.  Directly most leases and contracts are not worth the ink that was used to write it.  And he who pays the biggest bribe to the judge wins the case.

As one other person stated invest your money in a more stable country that has the Rule of Law where a lease/contract is enforced according to the law and not the amount of bribe paid.

B/R Steve

If you do go ahead with this deal, then make sure that it is an on going lease, and that they have to buy you out if they cancel the contract. Many westerners have good businesses in ukraine, but most have some horror stories about it.

For the amount you are going to invest in the lease, you can buy your own place and not be depending on leases.

Make sure that you cam all government interfering with your business. Ukraine is extreme corrupt, and black mail by officials are the norm. Be smart and think ahead.

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