Business partnership buyout : Advice please!

[Dwalsh2020]

Hi all

I wanted advice on a partnership buyout.

my business partner has approached me saying they wish to continue the business on their own. I really don’t want to leave the business but I feel it will be very difficult to now work with this person.

our business is 3 years old and has made very little profit during the first 3 years as we’ve been buying stock. It is now in the position to start making more profit as no further stock is required currently (its a events decoration company). I feel because I don’t want to leave the business and it wasn’t my suggestion, I should leave with everything I am entitled to.

We have a 50/50 agreement in place and I have put together a suggestion of a buyout amount to my business partner to include:

-the cost of half of our business stoc
-Half the profit of all future bookings we currently have a secured deposit against

aa the business wasn’t making much profit I felt this was a fair suggestion. Is there any advice anyone can give me or suggest that I can include/not include? New to this so it would be great to get some opinions.

 

[gpietersz]

You should take the future prospects of the business into account.

If you have helped build the business up and you are leaving just as it is about to become more profitable, you should ask for more.

On the other hand if the value of the business is not much more than the stock and half of existing bookings then its fair.

Has the business built up a customer base, or a reputation? Would you be better of letting our partner run the business but taking a share of profits (less than half if they are doing all the work).

 

[Dwalsh2020]

@gpietersz the business has built up a good online presence and recently has a showroom set up and also a regular venue slot in place. My business partner has said they only want to run it alone going forward so suggesting I take a cut of future profits and stay in the business isn’t an option. The future potential could potentially earn a lot more than it currently does so I’m keen to ensure I don’t lose out but I’m not sure my business partner will consider what I’m suggesting

 

[MBE2017]

Have you considered buying your partner out, and keeping the business? Just because they want to go it alone, it doesn’t follow you have to be the one to leave.

 

[Dwalsh2020]

@MBE2017 Continuing alone isn’t something I’d want to consider as I always wanted it to be a partnership. I would rather not run this business than do it alone so I feel my best option would be to sell my half of the business currently.

 

[gpietersz]

My business partner has said they only want to run it alone going forward so suggesting I take a cut of future profits and stay in the business isn’t an option.

Lots of businesses have partners or shareholders who are not active in the business. There are practical problems, but it happens.

the business has built up a good online presence and recently has a showroom set up and also a regular venue slot in place.

You should be compensated for giving up your share of that. It looks as though your partner wants to get the value of that for nothing. I think you need advice about how to negotiate a good deal. Maybe someone here like @The Resolver or others who have given advice in threads about things like disagreements between partners or shareholders.

What is the legal form of the business? Partnership, LLP, Ltd company?

 

[Dwalsh2020]

@gpietersz its a partnership. The agreement term was set up as 50/50

 

[The Byre]

If it is a common-law partnership as described under the Partnership Act of 1870 (I think that is the right date - not too sure) then the partnership is over when one party says (or better still writes) that it is over. In that case the goods and all other properties must be divided 50:50.

But I second the advice to talk to @The Resolver if you two can't get along. It is yet another sign that most partnerships are doomed from the get-go.

 

[Dwalsh2020]

@The Byre ive emailed him now as I’m due to give my business partner a suggestion of agreement later today

 

[gpietersz]

If it is a common-law partnership as described under the Partnership Act of 1870 (I think that is the right date - not too sure) then the partnership is over when one party says (or better still writes) that it is over. In that case the goods and all other properties must be divided 50:50.

Which means that you get half the website, showroom, and anything else - not just the stock.

I think you should avoid getting rushed. Either:

1. write terminating the partnership.
2. or tell him you need more time.

I really think the second is much better.

I suggest the first as a last resort if you cannot delay until you get advice. It will shift the pressure from yo to him as he cannot carry on the business: https://www.aabrs.com/dissolving-a-partnership/

That is assuming you do not have a partnership agreement that says otherwise.

 

[2020Lawyer2020]

It sounds like you have a written partnership agreement. So the starting point is to read that as it probably sets out what will be done if one person wants to leave or buy the other out and what happens if disputes arise.