Deciding to lease a business is a crucial step that requires a thorough understanding of the lease management contract.
This strategic choice offers unique opportunities and financial advantages for launching a business activity.
Is it possible to lease a business?
One of the questions entrepreneurs face is whether it’s possible to lease goodwill for a commercial activity.
The answer is: yes.
Leasing a business is generally done through a management lease.
This agreement allows the lessee to operate the business owned by the lessor in exchange for the payment of regular rent.
What are the conditions for leasing a business?
Lease management involves a formal agreement between the owner of the business and the lessee.
The terms of this agreement are crucial in defining the rights and responsibilities of each party.
The presence of a specific franchise clause, although not mandatory, can clarify the rights and implications of the parties in the event of collaboration with an existing chain.
Key points to bear in mind:
As a tenant
As a tenant of goodwill for a commercial activity, several conditions must be met.
First of all, you must be a merchant duly registered in the Trade and Companies Register (RCS) and the National Register of Companies (RNE).
Secondly, you must respect the intended purpose of the business, aligning your activities with those of the previous owner, unless the lessor agrees otherwise.
Compliance with professional regulations, conformity with the commercial lease and avoiding the detour of customers to other businesses are essential. In addition, regular upkeep of the business, maintenance of the premises, replacement of defective equipment and renewal of patents are obligations incumbent on the tenant. It is crucial to operate the business in such a way as to preserve its intrinsic value.
As a lessor
If you own a business but are not the owner of the premises, it is imperative that you obtain the authorization of the owner of the premises before letting your business.
You must provide all the information required to operate the business.
It is also your responsibility to ensure that the business complies with current health and safety standards.
Administrative and tax procedures for management leases
When considering leasing a business, the administrative steps involved are crucial.
The first step is to draw up the lease contract, recommending the assistance of a professional such as a lawyer or accountant.
Two essential points must be included in the clause: the duration of the contract, whether definite or indefinite, and the amount of royalties to be paid to the owner.
The second step is to publicize the agreement by publishing a legal announcement in an authorized newspaper, within 15 days of the start of the contract.
From a tax point of view, the lessor’s fee is subject to VAT, equivalent to 20% of the amount set out in the agreement.
The lender is also liable for CFE and, if the fee exceeds €500,000, CVAE.
On the lessee’s side, the royalty may be deducted from the company’s taxable income.
How does a management lease end?
The management lease agreement can be terminated in a number of circumstances.
If the fixed-term contract expires without being renewed, the lessor is not obliged to extend the agreement.
Unilateral termination by either party is also possible, usually subject to 3 months’ notice.
Non-observance of obligations by the tenant-manager, such as non-payment of royalties, may also result in termination of the contract.
On termination, the assignor regains the right to operate the business, and current employment contracts continue.
It is crucial to note that the lessee is not entitled to any compensation at the end of the agreement, even if he or she has contributed to enhancing the value of the business through his or her skills.
The end of this clause brings the business back under the exclusive control of the original owner.
Leasing goodwill for a commercial activity presents advantages and responsibilities for both parties.
Entrepreneurs considering this option need to understand their respective rights and obligations.
