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Clare
Clare, Family Solicitor
Category: Family Law
Satisfied Customers: 34509
Experience:  I have been a solicitor in High Street Practise since 1985 and have specialised in Family Law for the last 10 years
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I am separating from my wife.Previously we ran a business

Customer Question

I am separating from my wife.
Previously we ran a business together as a partnership. The partnership will be dissolved and i will have nothing further to do with the business. She will be taking it over as a sole trader.
Unfortunately the business has some debts.
credit cards
loans from family
over draft
un paid PAYE from last tax year.
My question is this:
Is it right that I would take some of this debt away with me? that the outstanding debt at the time of separation should be split 50/50 even though I will no longer be part of the business or drawing an income from the business? Is there a legal precedent or accepted way of doing this? I am unsure what would be considered 'fair' in this instance as she will still have the business cashflow to service her share of the debt (although she claims that the business will not service the debt - her personal income from the business will do this)
My feeling is that if I was to accept some debt I should at the very least maintain some equity stake in the business when it goes ltd in the near future (this looks likely as we have found investors).
Please advise!
Submitted: 2 years ago.
Category: Family Law
Expert:  Clare replied 2 years ago.
Hi
Thank you for your question.
My name is Clare
I will do my best to help you but I need some further information first.
What is happening with regard to the matrimonial home and any other assets?
Clare
Customer: replied 2 years ago.
Thanks Clare
That is undecided and will be dealt with seperately. She is keen to get a contract drawn up agreeing the share each of us will be liable for of the debt. If and when we come to selling the house / dividing assets then that will be dealt with then and there.
Expert:  Clare replied 2 years ago.
Hi
Are all these loans actually linked to the business
Clare
Customer: replied 2 years ago.
The credit cards are personal (but were used to pay for stock). All other debts appear on the company books and are clearly business debts.
So I guess to answer your question yes, All the debts are business debts.
Expert:  Clare replied 2 years ago.
Hi
What is the value of the business that you are giving up?
Clare
Customer: replied 2 years ago.
Annual Turn over of approx 650k. From which we took on average approx £55k/yr
Expert:  Clare replied 2 years ago.
Hi
Sorry - I should have been more specific
Id the business was sold how much would it sell for
Clare
Customer: replied 2 years ago.
£100k plus stock value.
Expert:  Clare replied 2 years ago.
Hi
Current stock value?
Clare
Customer: replied 2 years ago.
Not sure. Let's assume £50k
Expert:  Clare replied 2 years ago.
Hi
The first thing to say is that you and your wife are entitled to reach any agreement that you wish on this - provided of course that you both agree.
You can use Family mediation to assist in the negotiations if need be
www.familymediationhelpline.co.uk
However with regard to this issue the simple approach is that if these are debts of the business - and you are giving her your £75,000 share of the business, then it is only appropriate that she also takes on all the business debt in full
The only potential grey area is the personal Credit card debt where a percentage approach might be more appropriate
The other option is indeed for you to keep a share of the equity - you may need to assess which would be more advantageous to you in the future
Please ask if you need further details
Clare