What Questions To Ask Business Owner For Rental

[sarpesius]

This tactic is presented for comment:

If we see a property we might rent to open a business, how would we approach the current business owner or landlord?

SITUATION #1: If we say we want to rent the business premises, the current business owner will want to increase maintenance cost estimates. For example, he might say electric, water, etc. is higher than it is really is, so he can maximize income from the renter.

SITUATION #2: One the other hand, if we say we might buy the business, the business owner would have an incentive to minimize those same costs. He might want to make the purchase seem more attractive.

1. In the first case, we lose money by paying the business owner too much.

2. In the second case, if we buy the business -- after the business owner leaves, our maintenance costs are actually higher than he represented.

Therefore when we really want to rent business premises, it is a better policy to first say we are considering buying the property. Would it be reasonable to think this strategy will give us more realistic cost estimates?

suggestions invited on this matter.

sarpesius

Edited March 16, 2007 by sarpesius

[xbusman]

If you rent a business, only pay utilities direct. Thats the actual cost. If you pay a landlord they have a tendency to pad the bill. Ask to see the utility bills from the past year, their accountant has them all in a convenient file, if they refuse...walk.

The most important thing is that the landlord gives you free and easy access to the tabian baan. Make sure they have it, it can be accessed, its not with some bank, and they are willing to sign power of attorney and the other 46,121,849 papers that are required to have that information. If you have name or access problems with the tabian baan you are in for a world of trouble.

[Martin_F]

Hi Sarpesius:

Your situation is either you a renting an empty location to do some business either retail/wholesale or manufacturing.

The bills for utilities should be actual and not serviced charged.

You need to make it clear to the landlord that it is a business that will be renting it because (if it is ltd co) you need to deduct w/tax on the rental payments (and landlords generally complain and increase the cost in this case).

You may also need to ensure that you can get the correct permissions from the owner to register the business for VAT.

Or you are buying an existing business either as a going concern (share purchase) or an asset and goodwill purchase.

In this situation you would want to do due diligence on the results looking at the tax returns for the prior years to substatiate the value.

I would personally opt for the asset purchase as although you have to set up your own co there are no cans of worms hiding under the bedsheets if you coin by phrase and are not exposed to the past misdominors of the prior directors.

You then have to work out if the goodwill is worth payin for and that is your gut business feel backup with a cashflow projects for the future operations.

[sarpesius]

Your situation is either you a renting an empty location to do some business either retail/wholesale or manufacturing.

The bills for utilities should be actual and not serviced charged.

My question pertained to renting a retail restaurant venue with furniture already installed.

Can you clarify the difference between "actual" and "service charged"?

I would ask the owner of the business space (not the property it sat on) what his monthly charge for, say, electricity would be. Then if I rented the business full time, I would pay him the entire sum, or if I planned to rent the business space part-time -- say, 1/3 of a 24-hour day -- I would pay him 1/3 of his totall monthly electric bill.

This would not be an LTD or LP or LLP at first. It would be a sole proprietorship (aka DBA).

You need to make it clear to the landlord that it is a business that will be renting it because (if it is ltd co) you need to deduct w/tax on the rental payments (and landlords generally complain and increase the cost in this case).

Can you clarify this? Are you saying I would need to do paperwork to deduct my electric charges from witholding tax? How would this affect the rental payment I would make to the business owner? (I am assuming I would not have to deal with the actual owner of the underlying property.)

You may also need to ensure that you can get the correct permissions from the owner to register the business for VAT.

To clarify this, I assume you mean permissions from the business not the land owner.

Why would I need to register for VAT? Would I be getting a VAT refund on tax paid for electricity and water, etc.? What is connection between utilities payments and VAT for a falang sole proprietor renting from the primary business owner?

As a business owner, would I be paying tax on utilities?

sarpesius

Edited March 16, 2007 by sarpesius

[Martin_F]

See my comments in red below

Your situation is either you a renting an empty location to do some business either retail/wholesale or manufacturing.

The bills for utilities should be actual and not serviced charged.

My question pertained to renting a retail restaurant venue with furniture already installed.

Can you clarify the difference between "actual" and "service charged"?

Depending on the rental agreement the owner many not give you the actual bills but charge you another amount higher than the actual bill. This usually occurs in serviced offices or appartments or food court type places.

I would ask the owner of the business space (not the property it sat on) what his monthly charge for, say, electricity would be. Then if I rented the business full time, I would pay him the entire sum, or if I planned to rent the business space part-time -- say, 1/3 of a 24-hour day -- I would pay him 1/3 of his totall monthly electric bill.

Not sure what you mean here as it is difficult to rent space for 8 hrs unless it is a hawkers stall.

This would not be an LTD or LP or LLP at first. It would be a sole proprietorship (aka DBA).

Ok no problems on that. BTW what is DBA?

You need to make it clear to the landlord that it is a business that will be renting it because (if it is ltd co) you need to deduct w/tax on the rental payments (and landlords generally complain and increase the cost in this case).

Can you clarify this? Are you saying I would need to do paperwork to deduct my electric charges from witholding tax? How would this affect the rental payment I would make to the business owner? (I am assuming I would not have to deal with the actual owner of the underlying property.)

You may also need to ensure that you can get the correct permissions from the owner to register the business for VAT.

To clarify this, I assume you mean permissions from the business not the land owner.

Why would I need to register for VAT? Would I be getting a VAT refund on tax paid for electricity and water, etc.? What is connection between utilities payments and VAT for a falang sole proprietor renting from the primary business owner?

If it was a ltd co and registered for VAT then you need t oget permission to use it as business premises to enable registering for VAT. As it will be a sole trader the turnover will likely be less than THB1.8m so therefore no needto register for VAT.

As a business owner, would I be paying tax on utilities?

No tax on utilities and as not registered for vat no convern on recovery of VAT on the utilities. If you want to reclaim the vat on the utilities then you need to ensure that the name on the bills is the correct registered vat address for the company otherwise you cannot reclaim. The RD is very particular about names and address on invoices. That's why a lot of businesses have unclaimable vat expenses.

sarpesius

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MF edited font too small and erronious code

Edited March 16, 2007 by Martin_F

[sarpesius]

Ok no problems on that. BTW what is DBA?

DBA means "Doing Business As." It is another name for sole proprietorship in some areas of the USA.

In America, you have to post an announcement in a newspaper to state publically that you are "doing business as" (name of your company) within a certain time period after filing for your license.

This is where the name comes from.

sarpesius

[Chang_paarp]

As a foreigner you may find there are obstacles in the way of being a sole proprietor in Thailand. You may be forced to go the limited company route, the good news if you are a US citizen you can own the business 100% if it is registered under the Amnity treaty.

[Martin_F]

Ok no problems on that. BTW what is DBA?

DBA means "Doing Business As." It is another name for sole proprietorship in some areas of the USA.

In America, you have to post an announcement in a newspaper to state publically that you are "doing business as" (name of your company) within a certain time period after filing for your license.

This is where the name comes from.

sarpesius

OK thanks for that.

I wish you well in your wife's business operations.

[sarpesius]

As a foreigner you may find there are obstacles in the way of being a sole proprietor in Thailand. You may be forced to go the limited company route, the good news if you are a US citizen you can own the business 100% if it is registered under the Amnity treaty.

The Limited Liability Company, if that is what you are referring to, will soon require a minimum capitalization of 3 million baht, while a sole proprietorship, by my current figuring, would cost about 400,000 Baht for the first year.

What problems are you referring to regarding a foreigner starting a sole proprietorship?

sarpesius

[Moonfruit]

As a foreigner you may find there are obstacles in the way of being a sole proprietor in Thailand. You may be forced to go the limited company route, the good news if you are a US citizen you can own the business 100% if it is registered under the Amnity treaty.

The Limited Liability Company, if that is what you are referring to, will soon require a minimum capitalization of 3 million baht, while a sole proprietorship, by my current figuring, would cost about 400,000 Baht for the first year.

What problems are you referring to regarding a foreigner starting a sole proprietorship?

sarpesius

As far as i was aware, a foreigner cannot own a Sole Propreietorship.

I understand what you are trying to do here, but i think you are over simplifying everything dramatically.

Firstly, i gather (though i may be wrong) that you will be working in this establishment. You aint gonna get a work permit with that company setup, even if you could overcome the problem i point out above.

Secondly, i suggest you read as much as possible (there are a couple good publications that you can pick up in Kinokuniya or Asia Books) relating to doing business in Thailand. It sounds like you have no idea about taxation etc. and those books will be invaluable in guiding you through the quagmire.

Like i said, i do understand your goal, but get your head in those books, and read about company structures, taxation requirements (your company must be VAT registered for you to be allowed a work permit). It will be time very well spent.

[thaiprivateeye]

Or contact Sunbelt Asia (they are one of the boards major sponsors) and let them sort it all out for you.

Just my honest opinion...

TPE II

[smartecosse]

Like i said, i do understand your goal, but get your head in those books, and read about company structures, taxation requirements (your company must be VAT registered for you to be allowed a work permit). It will be time very well spent.

are you sure on that point?

[sarpesius]

....

As far as i was aware, a foreigner cannot own a Sole Propreietorship.

I understand what you are trying to do here, but i think you are over simplifying everything dramatically.

Firstly, i gather (though i may be wrong) that you will be working in this establishment. You aint gonna get a work permit with that company setup, even if you could overcome the problem i point out above.

Secondly, i suggest you read as much as possible (there are a couple good publications that you can pick up in Kinokuniya or Asia Books) relating to doing business in Thailand. It sounds like you have no idea about taxation etc. and those books will be invaluable in guiding you through the quagmire.

Like i said, i do understand your goal, but get your head in those books, and read about company structures, taxation requirements (your company must be VAT registered for you to be allowed a work permit). It will be time very well spent.

In this thread, another poster, chang paarp, said there are obstacles to setting up a sole proprietorship.

But he or she did not say it was not legal, and I was assuming that there are unwritten rules operating here.

My reading of the amity treaty is that an american can set up a sole proprietorship.

I have dialogued with sunbelt and other posters on other threads regarding these matters, and no one has denied that a sole proprietorship is possible.

I was given the title of one book, Start Up and Stay Up in Thailand.

As you can see, there are differing opinions on these regulations. Sunbelt indicates that a work permit is possible with a sole proprietorship.

We also note, from a businessperson's poll that just recently out, that Thailand is considered one of the most corrupt countries for business in Asia. This means that the only thing to do is to actually see what the government officials says.

However informative this current discussion is, this thread was originally about how to approach a property or business owner for rental.

sarpesius

Edited March 17, 2007 by sarpesius

[Cyberstar]

... this thread was originally about how to approach a property or business owner for rental.

It would be a bad idea to rent the business and it yields a possible future deadblow to rent the premises ... You plan on making a very successfull business, right? Well, let's say luck smiles - if you're renting the business from one guy and the premises from another guy, there'll be two guys out to get a better share of the cake when (or maybe before) the initial leases/contracts terminate. Particularly the business owner is dangerous inasmuch as he might want to kick you out, now you've shown him how to do things ...

So, my advice is ... don't approach a business owner for rental of his business. If you can't buy it - there'll be other businesses for sale. As for approaching the landlord for rental - get as close to basics as possible. Make sure waterbills, phonebills, powerbills, garbagebills etc. are delivered directly by the providers to a mailbox on your rented premises.