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  • #986552
    CG
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    Is there a recognized way to share retail business premises without forming a formal partnership? Obviously it would be desirable to have a written agreement covering shared rent and overheads, but can this be achieved without having the partnership as a separately taxable entity?

    One of the parties (let’s call him A) has a long-standing ongoing retail business, but plans to move into new premises at the end of the current lease; among the changes will probably be a new business name, different mix of stock etc. The new person (B) has a large private collection of similar goods for which he wants a retail outlet, sharing space and covering the opening hours jointly with A, without either employing other staff.

    If present plans work out, A and girl-friend (C) would live upstairs, C would have her own business (again already established but offering a service rather than retail) at the rear of the premises, and A and B would share the retail space at the front of the building. The lease would most likely be in the joint names of A and C.

    Time-frame: within 1-3 months from now. Location: inner north Melbourne.

    What sort of adviser would they need? Is this something a good accountant could handle? (Unlikely to be A’s present accountant.) Needs to be a low-cost solution as this is a micro-business only just over the GST threshold with its present stock mix. Are any of the Victorian government-funded Small Business Advisers likely to have the requisite knowledge?

    #1158384
    TehCamel
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    CG, post: 182644 wrote:
    [Apologies for typo in the header. No way to correct it.]
    Not sure whether this belongs here or in “need a resource”.

    Is there a recognized way to share retail business premises without forming a formal partnership? Obviously it would be desirable to have a written agreement covering shared rent and overheads, but can this be achieved without having the partnership as a separately taxable entity?

    One of the parties (let’s call him A) has a long-standing ongoing retail business, but plans to move into new premises at the end of the current lease; among the changes will probably be a new business name, different mix of stock etc. The new person (B) has a large private collection of similar goods for which he wants a retail outlet, sharing space and covering the opening hours jointly with A, without either employing other staff.

    If present plans work out, A and girl-friend (C) would live upstairs, C would have her own business (again already established but offering a service rather than retail) at the rear of the premises, and A and B would share the retail space at the front of the building. The lease would most likely be in the joint names of A and C.

    Time-frame: within 1-3 months from now. Location: inner north Melbourne.

    What sort of adviser would they need? Is this something a good accountant could handle? (Unlikely to be A’s present accountant.) Needs to be a low-cost solution as this is a micro-business only just over the GST threshold with its present stock mix. Are any of the Victorian government-funded Small Business Advisers likely to have the requisite knowledge?

    let’s ignore the existing premises.

    So, A and B would like to share retail space on some sort of arrangement
    while A and C share a residential tenancy arrangement above.

    you just need a sublease agreement between A&C as owner and B as tenant..
    no need to have a separate entity managing it all.

    then, B pays the agreed rent amount to A&C

    #1158385
    CG
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    Thanks, Andy, for that succinct summary.

    If it goes ahead there, the landlord would be a friend of a friend, rather than a commercial real estate company, which should make it easier to get agreement to a sub-lease. However, I can foresee complications arising from the mixed-use situation. Council rates, for example, might assess the whole building as commercial. Domestic dwelling upstairs may not have separate electricity meter; water use would be predominantly domestic.

    All of which makes me think that a mediator of some kind (not necessarily a professional accountant or lawyer) would be required to draw up an agreement that was fair to all parties, both financially and in terms of personal time commitment to running the business as a joint entreprise, especially as B would not have a defined separate space that he would be sub-leasing, although sales of his stock would be recorded separately.

    But I don’t know how one would find an independent mediator with the right sort of knowledge, capable of envisaging scenarios that hadn’t occurred to the parties involved.

    #1158386
    TehCamel
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    CG, post: 182672 wrote:
    But I don’t know how one would find an independent mediator with the right sort of knowledge, capable of envisaging scenarios that hadn’t occurred to the parties involved.

    I suspect an accountant, or a multi-disciplinary accountancy firm, would be a good start.
    they can help on the financial side of it, and usually have legal folk they deal with.

    #1158387
    YourDesk
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    I run a co-working space in Sydney and it is a similar concept to what your proposing.

    We have an agreement drawn up that licences the space out rather than sub-leasing, which could be a way to go.

    Otherwise a standard lease with special conditions attached addressing all your particulars would work, if you know what you want A, B & C should sit down, write it out as a Heads of Agreement and then give it to a solicitor to formalise for you.

    Simple

    #1158388
    CG
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    Thanks, that’s really helpful.

    Was the agreement that licences the space out drawn up by a solicitor? And was it before or after the premises were leased? Was there an existing co-operative set up as a legal entity? If not, in whose name is the lease held?

    I’m just trying to get my head around the successive steps required to do this.

    Edited to add: Is this the sort of thing that’s needed?
    http://www.rpemery.com.au/online/shared-office-space-licence.html

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