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F E Smith
F E Smith, Advocate
Category: Family Law
Satisfied Customers: 17613
Experience:  I have been practising for 30 years.
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I am in the process of separating from my wife. Amicably.

Customer Question

I am in the process of separating from my wife. Amicably.
This year i took over the running of my fathers business, I am designated as the lead partner with HMRC. It is a simple partnership arrangement. My wife was also made a partner as well as my parents who were the original partners. This was enacted before we knew we were heading to separation so my wife is registered with HMRC as a partner.
My wife feels that she has sacrificed a lot over the years so that we could take over running the business which she doesnt want any involvement in, yet she says that she wants financial return for no input as payment for the sacrifices she has made. what entitlement does she have, if any?
Submitted: 21 days ago.
Category: Family Law
Expert:  F E Smith replied 21 days ago.

Welcome to Just Answer.

I will be happy to assist with your question today. I need some time to consider this and compose a response. There is NO need to wait online because you will get an email when I respond. Sometimes it will be minutes, sometimes longer.

I apologise for any unavoidable delay, but rest assured I have not forgotten your question.

for background -

how long have you been together and married in total?

what is the business and is it still operating?

and what is she asking for?

Customer: replied 21 days ago.
married 15 years
the business is a seasonal caravan park and still operating. the land is owned by a trust my parants are teh trustees, the business rents the land from the trust.
she thinks that she is entitled to receive payment from teh business as she has sacrificed career etc to allow me to be near teh business
Expert:  F E Smith replied 21 days ago.

If there is no formal partnership agreement and no informal agreement as to what happens, then the 1890 Partnership Act still applies.

In the absence of an agreement to the contrary any partner gets an equal share of the profits even though they may do nothing.

As it is now, she is a partner and she is entitled to 1/3 of the profits unless there is an agreement to the contrary.

So I’m sorry to say, with no input to the contrary she is entitled to 1/3 financial return even if she sits at home and drink tea.

Of course, you can all sit at home and drink tea but then the business goes to rack and ruin. You could employ people (but not yourselves) so that there is no profit. But that would mean no profit for any of you.

Unfortunately, the Partnership Act which still applies, is woefully inadequate and there is no provision for one of the partners to be removed or retired or die without the partnership being dissolved which would mean basically selling off the business although there would be nothing to stop the 2 remaining partners buying it.

In essence, once she is made a partner, she cannot be unmade a partner unless she consents to leave and/or be bought out.

I am glad to help.

Hopefully, I have answered your query in a way that is simple and easy to understand.

I would be more than happy to clarify anything else for you. In the meantime, thank you once again for using our services.

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If you still need any points clarifying, I will be happy to reply because the thread does not close. In fact, it remains open indefinitely.

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That only applies to new threads, not this one. You have me exclusively on this one.

Thank you.

Best wishes.

FES

Customer: replied 21 days ago.
Unfortunately there is no partnership agreement or anything formal. The only formality that has been made is that i have added her to the HMRC partnership registration, and i can remove her from it at the end of the tax year. there is no rule about who gets what proportion of the profit. I suspect what she is trying to suggest is that she wants spousal maintenance from the partnership due to her sacrifices but my view is that so long as we agree on maintenance value for the children, then where i get the money from is irrelevant as long as i make sufficient and agreed provision for their care.
Expert:  F E Smith replied 21 days ago.

Thank you. Whilst she can only be made a partner with her consent, unfortunately, she can only be removed as a partner with her consent.

Whilst she may have the benefit of profit share, she also has joint and several liability for the debts of the company if it goes down the tubes.

There would be nothing to stop you running the partnership into the ground and doing something else to the exclusion of her unless she decides to play ball.

You could have a partnership meeting and agree that from now anyone working in the business, including partners would get paid an hourly rate for the work they do and thereafter, the profits will be split 50-50.

With 3 partners, 2 of 3 would be needed to agree that.

The hourly rate for the work that you do could gobble up all the money so that there is no profit or the profit is buttons.