Partnership Advice

[Andrew-P]

A friend of mine is currently a partner in a business where the relationship between the partners has broken down and my friend wants to know if they can set up a replacement / competing business or do they have to wait until the partnership has been dissolved (it is unlikely to trade without him).

 

 

I think there are assets but no written partnership agreement.

 

 

Can anyone help or give their thoughts.

 

 

Thanks in advance.

[ericsbrother]

What kind of partnership? Limited company or just HMRC registed?If the latter then it is easy to dissolve the partnership, you just inform the tax office of the date the partnership ceased trading.

What assets are owned by the company? If it is just tools or stock then the disposal should be noted on tax return and any profit or loss (or if just kept, any personal gain) entered on the returns in the appropriate place(s)

What does the other partner think of all this? Can your friend set up a competing firm? well, yes, unless they entered an agreement that says otherwise. It doesnt have to be in writing so careful thought should be given to just undermining the existing business as the other partner may have comeback.

[Andrew-P]

Thanks for the reply.

 

 

I understand the following is correct for this business:

 

• The business is a simple partnership registered with HMRC (it is not a limited company or a LLP)
  
• The company has few tangible assets. What it does have is some cash in the bank, a reasonably well known name, some design IP and a customer list (however this can easily be found in published sources with a few hours work)
  
• The other partner does not know what he wants and seems to want an unfair settlement
  
• There is no partnership agreement (crazy in my view) so there are no non-competition clauses (also crazy)
  
• As for undermining the existing business. I think my friend would do this simply by leaving as the other partner does not seem to do a lot and certainly none of the design work or creative things
  

Thanks again for your help.

[ericsbrother]

the point about the other partner not knowing what he wants but is asking for an unfair settlement does clash. Your friend should make a formal offer and then if that it not accepted, divide the tangible assets like cash in the agreed proportions or 50/50 and then try and settle on the intangibles like the business name and goodwill. If the latter is not possible then starting afresh and using the existing contacts is perfectly reasonable but expect the ex-partner to do the same if that is technically possible. If the other partner is not as driven as your friend he will soon allow the rest to drop and your friend can pick up the IP for nothing.

[Andrew-P]

Thanks for the advice which sounds really sensible to me - I will pass it on.