▷ Taking over a craft business: purchase, legal issues and more

Now is the time to take back the business properly. The most common options include buying a company or shares, buying for a pension, leasing and donating.

When you purchase the entire company, you acquire the company and become the owner through a purchase agreement. Alternatively, you can also decide to buy shares and become a shareholder of the company. This is a practical solution if you do not have enough initial capital for a complete purchase.

If you buy the company with an annuity, you will not pay the agreed sales price all at once, but over several years. In this way you pay the former owner, so to speak, his monthly pension and ensure his pension. This lasts for at least a period of 25 years.

In the case of leasing, you as successor only take over the management and organization, you do not become the owner of the company. This role falls to the landlord, who no longer participates in active working life, but can decide which tasks you have to carry out as a tenant. This solution will be interesting for you if you cannot afford to buy the company yet or if you only want to run the business for a certain period of time.

In most cases the donation of a craft business takes place within the family. The business is transferred to the new owner free of charge. However, be careful with gift tax: it depends on the degree of kinship and can increase from 7% up to a maximum of 50%.

Operational acquisition variant	Advantages	Disadvantages
Business acquisition	You become the owner, complete freedom of choice	High costs at the same time, perhaps high loans
Purchase of shares	Lower costs and less responsibility than the outright purchase	You only become a partner, not complete freedom of choice
Purchase against payment of pension	You become an owner, total freedom of choice, no one-off purchase sums, no loans	Long payment term (at least 25 years)
Location	Lower cost than purchasing, lower long-term commitment, lower risk	You don’t become the owner (only the manager), no complete freedom of choice
Donation	You become the owner, total freedom of choice, no purchase costs, no mortgage	Donation tax: 7%-50%

This way a fair purchase price is determined

Before taking over a company you need to determine the value of the company and the purchase price. But you don’t have to do it alone. Chambers of crafts, business intermediaries and tax consultancy firms will help you with value assessments and price negotiations.

With the so-called earned value method, your consultant uses the nationally standardized AWH valuation method and determines the realistic value of your craft business. For your reference: In most cases, the purchase price is based on the company’s annual sales, which means that most business owners choose around 90% of annual sales as the purchase price. However, since every craft business is equipped differently, it is important that businesses are always assessed individually.

Financing for the acquisition of your company

The courage to be self-employed is rewarded and there are several financing programs and support offers you can take advantage of in the skilled trades. The related financing includes investments, guarantees, subsidized loans and contributions.

For example, you can use the ERP participation program. In this case you make your liability capital available via private companies and thus increase your equity capital. The financing amount is based on your capital, so you can receive a maximum financing of 1.25 million euros.

If you do not have enough financial security to obtain financing from your bank, you can contact the guarantee bank in your state. They then take on the liability risk for you and your escrow fees stay low.

Depending on how high your financing needs are, you can also take advantage of subsidized loans. To do this, contact your bank. They will check your request and, if positive, forward it to the Kreditanstalt für Wiederaufbau (KfW). You will then discuss together which loan is best suited to you.

There are also a number of government subsidies you can benefit from. For example, the employment agency promotes the hiring of new staff as well as the training and further development of your employees. Some chambers of industry and craftsmanship offer you an economic consultancy program in which half of the consultancy costs are covered (up to a maximum of 4,800 euros).

Financing	Services
participation	ERP participation program: expansion of the asset base, financing up to 1.25 million euros
warranty	Assumption of liability risk by the guarantee bank, improved solvency, low guarantee fees
Subsidized loans	ERP start-up loan, ERP capital for start-ups: start-up years without repayment, low interest rates, proportional assumption of responsibility
Grants	Employment Agency: support for hiring and training (new) staff, start-up grant/start-up money when acquiring a business from unemployment benefit IHK: Consulting programs with partial reimbursement of consulting costs