End of business partner relationship

kulture said:

The first question is what legal setup is this business partnership? Is it a company or a formal partnership, or just two sole traders working together?

Secondly, although you say there is no contract, your "gentleman's agreement" is a contract and the fact you have shared profits (and presumably costs) has established a relationship between you.

You have not given nearly enough details for anyone to accurately advise. For example where is the property? what does the lease say? what assets and equipment and stock is held at the property? who owns what?

I would strongly advise you to seek out a good commercial solicitor and give them all these details.

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Thank you for taking the time to respond to my questions. From what I gather I believe we would fall under 2 sole traders working together but essentially it would be a partnership as we started the company together but just never formalised it with documents etc.

Thank you for clarifying what a partnership is in a legal sense.

The unit we rent is a simple month to month lease which we have had for about 6 years. It is where we do business from. We have customers who come to the unit where we provide professional services. We have equipment that we keep in the unit which has all been paid for together so I understand that this would be owned by both us and assets would need to be split if the business did end up closing. When we decided to rent a business unit my partner was not in a position to pay for the lease deposit so I paid for this with my own money. My name is the only name that has been on the lease for the duration of the time we have rented the space. This was known to my business partner at the time and there was no issue from his side at the time. In the past I have actually enquired about putting my business partners name on the lease so we would both be responsible for the unit but the company I rent from informed me that they were unable to add names to existing leases so we have left it at that. Obviously at the time we didn't foresee that the partnership may become unworkable. As I have mentioned it is becoming likely that our business relationship will come to an end in one way or another and a buy out seems unlikely at this point. If I was to start a new business on my own would I be able to carry on working from this unit after all the assets had been split? It is likely that he would feel aggrieved at this but from a practical standpoint it wouldn't make sense for me to lease a new unit if legally I didn't need to?. Especially if all the assets inside the unit had been split. I would imagine the partnership we started is not defined by any specific premises? and the fact that I took out the lease under my name then I am solely responsible for this? please advise if this is not the case.

Thanks again for the response

HFE Signs said:

As above, we need more information and the business setup is important.

When you say your name is on the premises, do you mean your sole name personally?

The easiest way to settle would be if you could come to an agreement for one of you to buy the other out based upon what you both deem fair, sounds like that might be a challenge though.

If we can have more info?

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Thank you for your response.

I have written a detailed response to the first reply above.

Yes my full name is on the lease details. Not a company name. All correspondence from my landlords has been directed to me over the duration of the lease period and they have no communication with my business partner.

Thanks

Chris Ashdown said:

It sounds like you have a partnership in law under the Partnership act 1890

If you cannot come to a agreement between the two of you then I advice getting legal advice

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Thanks for your response. From what I understand it does definitely look that way. The rights around the business premises is still slightly confusing.

Thanks

brucegreig said:

Probably not a bad idea to work on the assumption that there is an (unwritten) partnership agreement, which would mean that the business is shared between you and you can't just walk off with the business and carry on without him. Obviously consulting a lawyer will get you a clearer answer on that, but that will cost money. If you assume that a partnership does exist, you'd need to agree to end it by splitting up the assets (customer lists, money, lease, etc.), or one of you buying the other out.

A Texas Shootout might be a quick and simple solution to agreeing a fair price for one of you to keep the business and the other to leave:

- Firstly, you agree to use the Texas shootout mechanism. This only works if you both agree to this as a dispute resolution mechanism, you can't require your partner to engage in this.
- If you agree to use it, then the mechansim works as follows:
- One of you offers £x to buy out the other. £x can be whatever number the person making the offer thinks is fair.
- The other person must either (a) accept that price and sell or (b) offer £1 more and then the first person must accept that price and sell.
- The first person to make an offer needs to set it high enough that they would actually sell at that price plus £1, therefore this discourages low-balling.

Brutal, but quick and effective method of finding out what the fair price is. Only works if both of you have access to roughly the same amount of money. If one person has lots in the bank, and the other would have to borrow, then that imbalance will likely make this unworkable.

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Thank you for your detailed response. This has been helpful in understanding where we stand. The question of the business premises is still confusing to me though. The Texas shootout does indeed sound brutal but effective. Ill take it onboard. Thanks