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James Mather
James Mather,
Category: Law
Satisfied Customers: 22629
Experience:  Senior Partner at Berkson Wallace
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I have had a business partner for past 3 years and didnt set

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I have had a business partner for past 3 years and didn't set up a partnership agreement. Relationship has broken down and we are trying to resolve this with better communication however, aspects of the business I have managed for the past 3 years but now she is asking for me to hand them over for her to do. She admits she doesn't have the skills to take over straight away but she is realising that she has little knowledge of logistical parts of the business, these areas of the business she has also never shown any interest in (accounts / Google adwords) I am not seeing this request reasonable and there appears little rational for her wanting to do this. My concern is that she has also set up another business and her other partner has just started a Google campaign which seems coincidental that she now wants access?
At the beginning of 2013 I suggested a partnership agreement but she completely there anything I can do with what I see as unreasonable behaviour?
Hello, I am Law Denning and I am a practising solicitor. I have been an expert on this website in UK law since 2008. During that time, as you appreciate, I have answered thousands of questions from satisfied users on a variety of subjects.
Because we are all in practice with clients and court and other users, I might not always respond in minutes, particularly evenings and weekends. Please bear with me in that case. I will be online and off-line all day today.

It is my pleasure to try and assist you with this today. Please bear with me while I gather some further information from you in order for me to be able to advise you fully.

What do you ultimately want to happen?

Is she offering money?

Customer: replied 4 years ago.

Hello Law

Thank you for such a quick response. Firstly there is no discussion of money.

What do I ultimately want to happen? I want to continue with the business and so does she. However, I think a partnership agreement would give us both some protection moving forward. I did have some communications with a solicitor re an agreement and he sent me a letter with suggestions for us to talk about before we met him such as , who does what, annual leave entitlement, leaving the partnership, pensions, salary etc When I talk to her with this she refused to respond to any of the questions stating she wanted an agreement that stated she owns 50% of the business and nothing more. Needless to say I didn't want to pay solicitor fees for such an agreement. An example of the challenges I am having - 'One issue for her is hours we work. I suggested we record hours each week and then share them, with no agenda! If she was doing more hours then this would be reflected on our monthly payments'. She has refused to do this and describes me as trying to be her boss! I feel at the moment my hands are tied and what ever I suggest she refuses so it doesn't happen! I suppose I am looking at some sort of conflict resolution but making sure I am protected...if that makes sense!

Thank you.
So you both want to carry on with the business, partnership has failed and you have no partnership agreement. You also cannot come to an agreement.
In that case, the 1890 partnership act applies which states that if one partner retires dies or resigns, the partnership is dissolved.
What that means in practice is that if neither of you can agree who is to have the assets, then neither of you get them and they are sold on the open market or, if a sale is not an option, scrapped or otherwise disposed of. Neither of you has any more entitled to them than the other.
With the above in mind, it might be worthwhile discussing money for either of you to buy the other one out. If you reach stalemate then no one gets anything, she doesn’t get the assets and you get no money and vice versa.
She is correct that she does own 50% of the business although if one of you put money in the other didn’t, that person is entitled to be repaid from assets.
In the absence of any agreement, regardless of what effort each of you put in, the profits are divided 50-50. In effect, one of you can sit at home drinking tea and the other one does all the work puts all the money in and the prophets are still divided 50-50.
Only you know the hours you work on the money that you reach your view of put in so I don’t know whether the above is favourable to you or not.
I appreciate that it may or may not be the answer that you want but there is no point in me misleading you. I have a duty to advise you truthfully and honestly even if that answer is unfavourable.

Does that answer the question? Can I help further? Can I answer any specific points?
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Customer: replied 4 years ago.

Thank you for your reply. It is reassuring that you are not misleading me and I basically understand that my hands are tied as we both own 50% of the business. I was just hoping that there was something I could do with what is appears to be an unreasonable partner on all fronts without having to lose all the hard work over the past few years :-(

My lesson appears to be a partnership agreement from the onset?

Many thanks for your help

I’m afraid that you are not the first person to fall into the “no partnership agreement” trap and you most certainly will not be the last.

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