Partnership advice required

[Brum26]

Hi everyone,

I wondered if anyone could possibly give me some advice. Last year I had a business idea and did a lot of groundwork and research, including registering a domain and setting up website etc. I then ran in to a problem which prevented the business going live.

Fast forward 12 months and the previous problem was no longer there so I looked in to it again. I decided to go in to a partnership with an acquaintance who had more experience in this particular field. We did not setup or sign any partnership agreement but did setup a partnership business bank account.

The business is currently around 3 months old and unfortunately the relationship has broken down somewhat. I have been doing 99% of the work over the last 4-5 weeks and this is due to my partner losing money for the company by making error after error previously.

There hasn't been any discussion about this as I was waiting until we had time to sit down so that I could bring it up. Out of the blue today my business partner has told me that he is walking away as he is far too busy with his own work etc.

The company is currently in the red and up until now neither of us have taken a wage from the business.

He has told me that before he will sign any forms to remove him from the business bank account he is going to seek advice as he has put time and money in to the business. My question is where do I stand? If anything would he not be liable for 50% of the current shortfall in the accounts?

I don't want to be petty and to be honest it is a relief that he has decided to walk but I could do with some clarification on whether I personally would be liable to pay him anything or whether he can expect the business to pay him anything.

I'd appreciate any advice you can give me.

 

[MOIC]

This is not legal advice......................

If the business has not made any profit until now and he has decided to walk away from the business..................dissolve the business and start again in your own name.

If he is a partner, and there was a verbal agreement that you would share 50% of outgoings and profits, it seems unreasonable for your partner to look at what he has contributed only, without taking into account the current profitable status of the business and all expenses incurred to date.

At the point of him advising you that he wants to walk away, an appraisal of the business should be done and responsibilities divided equally.

If there are any assets, then you can offer to buy his share.

This is just my (unprofessional) opinion and may be wide of the mark......................but it sounds reasonable.

 

[Brum26]

Thanks for that. That is pretty much what I thought. I would prefer to carry on using the same name as all the branding is done and all stationery etc printed in that name. He seems to think that even though he has chosen to walk away that he should still be entitled to a share of future profits. This I do find very strange. Although I would prefer to carry on using the same business name, if we can not come to an amicable solution then I will inform him that I am closing the business down and that he will be liable for 50% of any debts and liabilities. I have told him this and I am waiting for a response. Hopefully it doesn't come to that.

If anyone else has experience of a similar situation then I am happy to listen to all opinions.

 

[MOIC]

I would get legal advice and have any correspondence drafted and sent by a competent solicitor.

Best of luck.

Ron
Your UK Man In China

 

[RayLevy]

Hi

If you have no agreement between you setting out rights and obligations, and you didn't set up a company, then you will have a 'common law' partnership. This means that all the assets, profits and losses are owned equally between you.

When you reach an agreement, it is certainly best to document it, so there can be no arguments later (particularly if you then make a success of the business). Make sure the exit document includes ownership of the intellectual property rights and whether there is a right (or refusal) to allow the exiting partner to be involved in a competing business.

Ray