Dilemma - made a big mistake!

[tykeylady]

Hi
Last year when I was setting up I developed the business idea with a partner. We never made an agreement - yes I know big mistake! Basically she put in £1,500. Anyway things have come to a head and we have mutually agreed that she will no longer be a partner. She is quite happy to go to be honest as she has no interest in the business but she doesn't want her money back, wanting to leave it as an investment! Now I want her gone completely!
I'm not sure what to do from here as i don't want her to have any ownership over the business. I've said we need to draw up a legal agreement stating that she is not a partner and what her return will be. Am I right? Can anybody recommend where I can get this done pdq on the net?
Any other thoughts on this? From what I've read 5% per annum is the correct rate of interest.
Can I just give her the money back even though that is not what she is wanting?
Any advice much appreciated, I'm out of my depth on this one!
Vicki

 

[Jayne]

Have you thought of starting you own business in your name and taking the customers with you. Leave that business dormant or make sure there is very little profit and she'll probably want her money back then. I know you can buy her out, but will probably cost more than she paid in and she would have to agree to that.

Most solicitors give 30 mins free legal advice, I'd go and see one and get real facts. I know a solicitors letter costs around £25, maybe that will show her you mean business and want her out. She may back down, worth a try without having to go to lots more expence.

Best Wishes

Jayne

 

[Alpha]

Vicki

You havent said whether you have notified HMRC of a partnership or traded as a partnership.

Basically in the absence of a formal agreement the partnership act 1890 still applies and its rules and applications can be unexpected for example the loaning of money is not evidence of the existance of a partnership.

It may initially be as simple as asking the other person to give to you in writing their resignation from the partnership (If you both believe that one existed). Once received you can then return their money to them with a cover letter thanking them for the loan.

If you have traded as a partnership they are enititled to an equal share of the profits and capital of the business and also must contribute equally towards the losses. In this case where you have traded you may need accounts to be drawn up to see what the position is.

Firstly more information is required as to the circumstances and timing.

 

[tykeylady]

Nobody has been informed re the partnership. It was a verbal agreement only. At the moment there is no profit as the venture only started April 05.
Would I need the resignation of partnership to be drawn up by a solicitor or would a simple letter be enough if she did come back with a claim on the business? I don't think she will but you just never know, if the business does well then I want to make sure I'm not losing part of it.
Thanks for your help
Vicki

 

[Alpha]

I think you will find that technically there is no partnership and therefore the return of her money with a covering letter should suffice. If you want a little added peace of mind send it recorded delivery so that you can prove that she got the letter and the cheque.

ps If you are trading make sure that you have registered and are paying class 2 National Insurance.

 

[tykeylady]

Thanks for that information. Yes I am registered and contirbuting to NI
Thanks you that was really helpful and I feel much better about things now
Vicki