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1. Where there is a partnership in existence but there is no written partnership agreement, then the provisions of the Partnership Act, 1890, apply by default. Within that Act there are provisions which apply to the winding up of a partnership. Basically, all debts are first paid, then capital sums repaid such as the money he put in at the start, and then the remainder is divided equally between you and him. So this is the position if you cease business today.
2. However, this ignores the reality that you have a valuable business which can or could be continued by one partner after the other partner has been paid off. Additionally, there is the possibility that the business may be sold and money generated which would then be divided between the partners after capital sums have been repaid.
So, as he is entitled to take his investment out before profits are divided, and I know that the combination of the value of the lease and the stock is less than his original investment, then there is no way that any money will be due to me if the business is sold?
3. Accordingly, you have a number of options. One option would be that you put a written proposal to this partner of yours that he be paid his capital sum but you get to continue the business in his absence. As part of this, youu can also look to pay him back his capital sum over time. A second option would be to cease operation of the business for one day and serve a notice of dissolution of the partnership. This would bring the partnership to an end with the relevant accounting taking place. Then a day or two later, you could then open up the same business in your own right effectively trading on the previous goodwill and clients of the partnership. Your former partner would be limited to getting whatever money was left in the partnership at the time of its dissolution. With this option however, you need to be certain that you can get the lease on any premises transferred over to you. So it will take a bit of doing.
Thanks. The business is currently closed anyway as it is seasonal and won't reopen until Easter. Please see question above re sale.
Also could you tell me a bit more about how I get out of the business, as I may as well do that if I can get nothing. Can I just resign from the partnership? Does this have to be done through a solicitor? Am I then free from any debt accrued from now on?
4. To "get out" of the business, you simply serve a notice of dissolution of the partnership. That brings the partnership to an end. A solicitor will do this for you. Secondly, if the sale of the partnership or its assets do not exceed the capital put in, then you won't get anything from the partnership's dissolution, I regret to say. That is just simple economics.