Partnership dissolution problems

J

julianlv123

Guest
Went into partnership with friend in November 2006. Bought the lease on a pub and things were ok if a little hard work at times. We didn't have any formal partnership agreement.

She left the business in September 2009 but we are still to come to an agreement. She wants the capital back that she introduced at the start but I have offered her 50% of the net book value at September 2009 plus 20%.

This amounts to around 40% of the original money she introduced. The business has suffered due to loans we took out to purchase the lease and to get us through difficult trading in the first 2 years.

I have operated the business effectively as a sole trader for the last 18 months thinking that we would come to an agreeement.

She has just dismissed my offer outright and says she wants to continue in the partnership until things improve and get a return on her investment.

I am not happy to be working 80 hours a week to keep the business afloat and pay off debts that we have accrued together to see her benefit.

Any ideas on where I stand legally and what my next action should be.

Thanks
 
close the partnership down and split what is left over 50/50.

This may be a little difficult if you are planning to 'continue' trading as she may argue that you have gotten the goodwill of the business for free.

I think in the absence of a partnership agreement that the partnership automatically falls under the blah blah parrtnershhip act. Sorry on just giving you you somewhere to start as there are many questions to be asked before you will get a proper answer.

Perhaps you should have a chat with your accountant but be sure the accountant is on your side. If not get a new one and preferably one with insolvency experience of the business.
 
It's a very tough one.

You should draw a large salary out of the partnership.

The partnership's liabilities will exceed the assets and she will be jointly and severally liable for those liabilities.

You should appear at all times reasonable. But put her on notice that the partnership is losing money.

Brendan
 
Actually just while this going on what is the current position with the bank accounts and control etc. is there any chance that your partner could help themselves to funds without your knowledge/agreement?

Do you have the funds to pay the 40% you mention? Also, who prepared the accounts as at September 2009 and are you happy that they are fair and accurate etc.

If so just pay her the 40% and say that is what the business was valued at at the date of dissolution. Leave it to your partner to attempt to take the final 10% from you.

In saying that what is the current position with loans etc? The reason I ask is that perhaps it is best to leave your partner hang on in there however get an agreement that from now on you are entitled to a larger share of the profits from here on out but have your partner there to share with liabilities should the business get into financial difficulty.
 
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