Partnership to sole trader part of divorce

Discussion in 'Legal' started by Martindon, Jul 17, 2019.

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  1. Martindon

    Martindon UKBF Newcomer Free Member

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    My wife and I run a small hotel.
    We are getting divorced and dealing with things amicably
    Part of the settlement is that I will continue to own the hotel and the business.
    We have no partnership agreement.

    The question.

    Can we simply write to each other dissolving the partnership stating that from a fixed date I will take ownership of all assets and any future / current liabilities ( we have some plant machinery on lease which I am happy to continue paying or does this have to be cleared?)

    Should we also echo the financial settlement agreement to show what she is receiving?
    Or can it just be agreed that she receives nothing out if the business as we already have another agreement ( separation one) stating who gets what asset.

    We have an outstanding mortgage and the provider is happy to just remove my wife from that.

    I get confused with the 1890 Act. As it looks like I would have to call in money owed and pay all debts - mortgage etc first. Or is it a case that as long as the companies we purchase from are aware it's a change to a sole trader and are happy then nothing needs to change ( obviously HMRC / tax etc needs done)

    My divorce solicitor is implying that it's a complicated thing and could cost around £4000 for the dissolving of partnership and for me to be self employed.

    Thanks for any help this was unseen on our part and is holding things up. We want to get it sorted as quick as possible so we can finalise or seperation as she is looking to move abroad.
     
    Posted: Jul 17, 2019 By: Martindon Member since: Jul 17, 2019
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  2. Scalloway

    Scalloway UKBF Legend Free Member

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    If there is no partnership agreement than that is all you need. You will need to negotiate a financial settlement.
     
    Posted: Jul 17, 2019 By: Scalloway Member since: Jun 6, 2010
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  3. Martindon

    Martindon UKBF Newcomer Free Member

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    Does my "divorce" financial settlement count if the business is included. Or should we do a separate one?
     
    Posted: Jul 17, 2019 By: Martindon Member since: Jul 17, 2019
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  4. Scalloway

    Scalloway UKBF Legend Free Member

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    I am an accountant, not I divorce lawyer so I will answer in those terms.

    When a partnership is dissolved there will be assets and liabilities which are financed by the partners' capital accounts. To close the partnership books these are all written out to zero and each partner will have a sum that they are due from the business.

    You are taking out your share in the form of the business assets and liabilities. These will form the opening balances in your self employed business.

    What your wife needs to get is her share of the value of the business at closure. That is what you need to negotiate.
     
    Posted: Jul 17, 2019 By: Scalloway Member since: Jun 6, 2010
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  5. Martindon

    Martindon UKBF Newcomer Free Member

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    Okay. Thank you.

    Can the financial agreement be part of the letter dissolving the partnership. E.g. on this date the partnership will cease and as discussed you will recieve x remuneration for leaving the partnership. I will retain all assets etc and continue to run the business as a sole trader.

    Or should it be done separately?

    Appreciate the responses.
     
    Posted: Jul 17, 2019 By: Martindon Member since: Jul 17, 2019
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  6. Scalloway

    Scalloway UKBF Legend Free Member

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    As I say I am an accountant, not a divorce lawyer. My thought in this matter is that there should be two steps.
    1. Dissolve the partnership
    2. Offer a sum as your wife's share of the partnership funds.
    I wouldn't make 1 contingent on the sum offered in 2 being accepted.
     
    Posted: Jul 18, 2019 By: Scalloway Member since: Jun 6, 2010
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  7. Clinton

    Clinton UKBF Legend Full Member

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    Your ancillary relief / financial settlement can't dissolve the partnership. There are different and formal steps required to deal with the partnership side of things.

    And you expect us to say, "Nah, it's simple, ignore your lawyer"?

    Pay the bloody £4K, it's a steal at that price, and do the job properly!
     
    Posted: Jul 18, 2019 By: Clinton Member since: Jan 17, 2010
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  8. Martindon

    Martindon UKBF Newcomer Free Member

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    Can she be offered £0
     
    Posted: Jul 18, 2019 By: Martindon Member since: Jul 17, 2019
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  9. Martindon

    Martindon UKBF Newcomer Free Member

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    Well it seems I have been led up the proverbial garden path by my lawyer. As unless you disagree it seems it is possible to dissolve a partnership quite simply by writing of a formal letter. So £4000 for a solicitor to do that does seem pretty steep! The divorce / conveyancing side is a separate cost altogether . It is 4k to dissolve partnership. I'm happy for you if £4000 is easy money for you but I don't have those sort of funds available.
     
    Posted: Jul 18, 2019 By: Martindon Member since: Jul 17, 2019
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  10. Scalloway

    Scalloway UKBF Legend Free Member

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    Yes she can. Whether she will accept it will be a different matter. How good are your negotiating skills? Paying £4,000 may end up seeming a bargain.
     
    Posted: Jul 18, 2019 By: Scalloway Member since: Jun 6, 2010
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  11. Newchodge

    Newchodge UKBF Big Shot Free Member

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    She can be offered anything you want to offer, you could offer that she has to pay you £10,000 to dissolve the partnership.. The important part is what she will accept.

    My worry would be that the business is part of the matrimonial property and your divorce lawyer should be the one advising on whether your proposal is 'safe' in terms of the division of matrimonial funds.
     
    Posted: Jul 18, 2019 By: Newchodge Member since: Nov 8, 2012
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  12. Mr D

    Mr D UKBF Legend Free Member

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    Divorce is easy and cheap too.

    Its generally the other aspects involved that take the time and money.
    Which is where lawyers make their money. People often have property, investment, business, kids, entwined lives etc.

    May be worth asking the lawyer what is involved for the £4k cost.
     
    Posted: Jul 18, 2019 By: Mr D Member since: Feb 12, 2017
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  13. Martindon

    Martindon UKBF Newcomer Free Member

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    We've all the matrimonial side sorted the business ( is down as motimonial property we also live on site) kids, 2nd property, savings etc. All agreed as far as we thought just getting written up by solicitors. Then got a call from a corporate solicitor from same office advising that to include dissolving the business and doing TUP for staff would be the extra 4k.

    Struck us as crazy as everything was already agreed and split to do with business and everything else. - Granted we didn't appreciate we had to formally dissolve the partnership just thought we had to change stuff with HMRC and bank account signatories
     
    Posted: Jul 18, 2019 By: Martindon Member since: Jul 17, 2019
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  14. Newchodge

    Newchodge UKBF Big Shot Free Member

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    If your divorce lawyer is happy that the divorce settlement is watertight, I cannot see how you can need to spend that much money to dissolve the partnership, consult with the partnership employees that they are now employed by a new employer but nothing elsa has changed (TUPE) and get on with it.
     
    Posted: Jul 18, 2019 By: Newchodge Member since: Nov 8, 2012
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