Business partner walked out, how do i stand
Discussion
Hope one of our legal eagles can shed some light on this one!
I was in business for the last 3 years with a Mate (now ex mate) no formal agreement signed, I put most of capital in and due to him having "previous" on the money front, everything bank wise was in my name, the only thing that states it was a partnership would be the parnership tax return and VAT. Things have been a bit tight recently and i have been paying myself less, but due to his situation (3 kids and a wife that doesnt work) he was taking his full amount, and it all came to a head when the overdraft was reached and he couldnt have anything, so after his missus chewing my ears off he walked out, bought car keys, phone and shop keys back, and i havent heard from him in a week. I have however been left with all the debts, and a shop full of machinery, do you think he could lay claim to anything, or would that mean he would have to pay me off, as ive taken far less from the partnership than he has and have a fair chunk to pay off debt wise?
I was in business for the last 3 years with a Mate (now ex mate) no formal agreement signed, I put most of capital in and due to him having "previous" on the money front, everything bank wise was in my name, the only thing that states it was a partnership would be the parnership tax return and VAT. Things have been a bit tight recently and i have been paying myself less, but due to his situation (3 kids and a wife that doesnt work) he was taking his full amount, and it all came to a head when the overdraft was reached and he couldnt have anything, so after his missus chewing my ears off he walked out, bought car keys, phone and shop keys back, and i havent heard from him in a week. I have however been left with all the debts, and a shop full of machinery, do you think he could lay claim to anything, or would that mean he would have to pay me off, as ive taken far less from the partnership than he has and have a fair chunk to pay off debt wise?
He probably just needs a breather.
Id write up all the outgoings and see where you stand when set against the assets.
If there is still equity in the business you need to decide what to do.
You could offer to buy him out of the rest at book value, less the extra he has already had.
Or if the business is at its limit. Wind it up and sort out the finances.
Best to get him to "officially" resign and some sort of exit paper work sorted though. As he may have equal claim to the assets.
I would think it would depend on how you paid yourself.
Id write up all the outgoings and see where you stand when set against the assets.
If there is still equity in the business you need to decide what to do.
You could offer to buy him out of the rest at book value, less the extra he has already had.
Or if the business is at its limit. Wind it up and sort out the finances.
Best to get him to "officially" resign and some sort of exit paper work sorted though. As he may have equal claim to the assets.
I would think it would depend on how you paid yourself.
had this happen to me. Tell him that he needs to resign properly (tell him its because the paperwork needs to match up with paye etc.) then if he falls for it - he looses all claim to assets. Seeing as how all the bank stuff is in your name - tell him there is other dept attached to the company that he didn't know about and that your deep under in dept now - he is likely to want to get as far away from you as possible and leave you to sink. When thats all agreed, your the new owner and everything is yours! NB - do not tell the bank this is happening, they will freeze your account until it is resolved. Pass the word out through people he knows that he has left you "deep under" so that it gets to him through the grapevine - he will believe it more. LEARN FROM THIS IN THE FUTURE - AGREEMENT AGREEMENT AGREEMENT
Frimley111R said:
Friends, people who trust each other etc. A PA is like a pre-nup, it essentailly says what will happend when you split but when starting out that is the last thing on your mind.
I can't help with the OP problem, other than get some paid legal advice from a local specialist (ring around, most good firms will spare you 10-20 mins to discuss and advise if it is there area of expertise); will probably save you money in the long run. In comment to the above, doing business with friends or family has some potential upside, but far too many negatives, especially without any written agreement. Have friends, do business, keep the two separate.
Edited by plg on Monday 9th August 11:40
Is the company limited?
If it is and you want to close it off you will need to liquidate it as soon as possible. This will stop all debtors chasing you and the worry of phone calls and visits to premises etc. The only thing about this is the cost involved, you could be looking at a few thousand to get it done properly.
Once you liquidate the only thing you may be liable for is the overdraft. Did you sign a personal garauntee on this? If you didnt then you're in luck but if you did then you will owe the bank personally even after the company is liquidated. So at worst here your looking at paying a company to liquidate (speak to your local accountants or business recovery service) and paying the overdraft.
I think it's completly out of order of your "mate" to take his wages to the back of the overdraft (which you are liable for not him). Mind you i have to say it's a pretty stupid thing you've done, by not having some sort of agreement with said mate.
Give him a bit of space then try to see if he can helpyou out considering what's happened.
If you want to keep the business going then get his name off everything and get him to sign a release form.
If it is and you want to close it off you will need to liquidate it as soon as possible. This will stop all debtors chasing you and the worry of phone calls and visits to premises etc. The only thing about this is the cost involved, you could be looking at a few thousand to get it done properly.
Once you liquidate the only thing you may be liable for is the overdraft. Did you sign a personal garauntee on this? If you didnt then you're in luck but if you did then you will owe the bank personally even after the company is liquidated. So at worst here your looking at paying a company to liquidate (speak to your local accountants or business recovery service) and paying the overdraft.
I think it's completly out of order of your "mate" to take his wages to the back of the overdraft (which you are liable for not him). Mind you i have to say it's a pretty stupid thing you've done, by not having some sort of agreement with said mate.
Give him a bit of space then try to see if he can helpyou out considering what's happened.
If you want to keep the business going then get his name off everything and get him to sign a release form.
As a word to the wise, the Partnership Act of 1890 is still the governing law for partnerships.
http://www.opsi.gov.uk/RevisedStatutes/Acts/ukpga/...
The big thing about this is that without a partnership agreement, you can't chuck him out of the partnership. And the law on who gets what at the end is troublingly vague.
http://www.opsi.gov.uk/RevisedStatutes/Acts/ukpga/...
So long as you get him to "quit" you should be OK though.
http://www.opsi.gov.uk/RevisedStatutes/Acts/ukpga/...
The big thing about this is that without a partnership agreement, you can't chuck him out of the partnership. And the law on who gets what at the end is troublingly vague.
http://www.opsi.gov.uk/RevisedStatutes/Acts/ukpga/...
So long as you get him to "quit" you should be OK though.
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