I have a client who is currently in a partnership - its a simple partnership that has been built up over a number of years however there was no legal written agreement at the time of entering into the partnership- one partner wishes to leave
- where does that leave the other partner - can the business remain the same but swapped to a sole trader,
can the business name be kept along with the accounts for the business - or do both parties have to 'dissolve' the partnership as such and both start afresh?
Also they do not have shares, equity, or many materials or equipment but with what they do have would that require to be split or does the remaining partner have to pay the leaving party for these items to keep within the business -
sorry for so many questions but I have never came across this before - I would advise them to seek professional help but its also for my insight as well but not to give advise in anyway! many thanks!
The Partnership Act (http://www.legislation.gov.uk/ukpga/Vict/53-54/39/contents) says that when a partner leaves, the partnership is dissolved. The remaining partner can set up a new business and he may get the departing partner's agreement to carry on the partnership's business as a sole trader ... in other words, he could buy out the departing partner.
The new business will have to produce its own accounts. The old business must wind up its affairs.
The business name could possibly be retained if the departing partner agrees, or if the name is not a registered trade mark and the new business does not hold itself out to be the old one so as to mislead others (difficult).
In the absence of an agreement, all old partnership debts must be paid out of partnership property before remaining property and profits are shared equally, but each partner is liable up to the full amount of the partnership's debts if the other reneges. The partners may make any agreement as to sharing profits and assets or transferring them, but they cannot escape responsibility for unpaid debts.
You should - no, you must - advise professional help.
