help-partnership dispute

scorall · 05-01-2009, 07:39 PM

HI everyone- hopefuly you can all help me out. I recently decided to go into partnership with a friend from uni and form a business together. I had lots of contacts and companies to bring business in. We both put in a similar amount, opened a bank account and informed the revenue. Despite drawing up a partnership agreement to protect us both my friend decided he didn't fancy it and came up with a 2 page document of his own, which in the end as we couldn't agree on which contract to use didn't get signed- so despite having bank account open and revenue informed and we have been trading for a few months we have no partnership agreement.
Although we started out the very best of friends my partner is now making unrealistic demands. I have private clients that I see during the week as well as the business clients, and he only works on the business clients and doesn't have any other work. The business isnt generating enough money to pay us both a good wage at the moment and we both get a grant each towards our expenses while everything takes off. My partner says he is desperate for money and thinks that I should give HIM three quarters of my grant as I have private clients and are not as committed as he is!! I have two children to support and I am qilling to work for as long and as hard as it takes to make the business a success- he only wants to work office hours- i work evenings and weekends as well. If i give up my private clients then there will be half as much money to pay us as there is at present as I will need to draw more money from the business to make up for loosing my private work. Our grants are given to each of us personally so there is no way I should have to give him three quarters of my grant as well as his own. Things have now turned nasty between us and we are barely talking. This is obviously bad for the business and I am seriously thinking of just walking away. I really want to continue with the business and make a go if it but I can't work with my partner. So here is the question: do I just say thats it and pull out- and have the partnership dissolved, do I buy him out and continue or do I sell him my share- he can't afford my share as is in debt up to his eyeballs. I would walk away as I said but the contracts that I bought into the business I have been working on for 2 years- in fact I have been working on a voluntary basis for 2 years with some of them. If the partnership is wound up then I will loose my grant and I need some of the contracts that I bought with me to the partnership otherwise I won't be able to manage financially. Its all just a mess- so what should I do? With no partnership agreement how do I go about getting the partnership dissolved and what should I do.If my partner doesn't want to carry on and we just fold the business and I then decide to start up again on my own can I use the logo and stationary etc we have paid for as a partnership?
If my partner would let me buy him out then my sister in law has said she would buy the partner out and come in with me and then we think we would go limited- how could we do this?

tkessex · 05-01-2009, 09:31 PM

If no partnership agreement exists then you are bound solely by the conditions of the Partnership Act. I would suggest speaking to a solicitor, or perhaps even an accountant, if there is any part of the act which appears confusing, but it does state that any partner is free to dissolve the partnership upon giving written notice to those concerned.

That, of course, wouldn't necessarily help you in this case. If you were to do this there's nothing to stop you working on your own, or indeed with a new partner, and clients could be enticed away from your previous venture. However, ownership of any logos etc would be split equally between yourself and your partner (assuming an equal amount of capital has been put into the business), so a written agreement of ownership would be required to re-use them in the future.

It's clear that the demands your partner is currently making of you are unfair and unjustified, not least because partners aren't automatically entitled to draw a wage from the business. My guess would be that the debts your partner has are somewhat guiding in his attempts to seek financial aid, though it doesn't appear that he's going about things in the nicest way possible.

Again, talking to a solicitor is adviseable (as is reading through the associated sections of the Partnership Act), but I would consider sourcing a new partner and making an offer to buy your existing partner out. Quite what you offer him is up to you, but three-quarters of your grant wouldn't seem like a bad place to start. Just remember that you are not obliged to give him anything, and he's not entitled to draw anything.