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Alice H
Alice H, Solicitor/Partner
Category: Law
Satisfied Customers: 2850
Experience:  Partner in national law firm
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I went into partnership with a friend to open a pub but things

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I went into partnership with a friend to open a pub but things didn't work out and we ended the partnership ended. We each out approx £2000 into the start up of the business and this is what I offered to give her back. The business had only been trading for 10 weeks and everything was in my name including the tenancy agreement and the public licence. There was no input into the business or any ideas on how to take the business toward from that side. We both worked the bar and did the cleaning free and didn't take a wage until we could see what outgoing a there were. I did all the ordering of stock and the admin and promotion of the business. She is now saying she wants all her initial outlay of the business plus half the value of the stock and profit and any tax rebates that may be due. There was never any legal document to say there was a partnership and I have been to an accountant and the final figure is just over £2000 which was my initial offer. She's now threatened me with legal action but I cannot see how she can get half of what is not in the business. Can you help please.
Good morning. My name is ***** ***** I am happy to help you today. Do you have a partnership agreement?
Customer: replied 2 years ago.
No there was nothing in place, nothing signed. As fad the brewery are concerned it is just me running the pub and the tenancy is in my name only
OK. And just to be clear - are you saying the £2,000 offer is based on a final calculation of all the debts/assets/profits etc?
Customer: replied 2 years ago.
Yes, it's about £2280 in total. That's half of everything. Bills have been included and a stock take was done
Where there is no partnership agreement then the Partnership Act 1890 applies. The first issue that has to be determined is whether a true partnership exists. Partnership exists where two or more persons are involved in a business "in common with a view to profit" (s.1 PA 1890). This seems to be what you both intended so there is going to be little dispute that you were in a partnership together. The next issue is to determine what the assets and liabilities of the partnership are. Even though the lease is in your name and you ordered the stock, these things were done for the purpose of running the partnership business; without premises and stock the business would not work obviously. So, when it comes to the final calculation, a court will probably take the lease and value of the stock into consideration. This will then have to be distributed in a specific order which is set out in s.44 PA 1890 and the following rules have to be observed: (a)Losses, including losses and deficiencies of capital, shall be paid first out of profits, next out of capital, and lastly, if necessary, by the partners individually in the proportion in which they were entitled to share profits: (b)The assets of the firm including the sums, if any, contributed by the partners to make up losses or deficiencies of capital, shall be applied in the following manner and order:1.In paying the debts and liabilities of the firm to persons who are not partners therein:2.In paying to each partner rateably what is due from the firm to him for advances as distinguished from capital:3.In paying to each partner rateably what is due from the firm to him in respect of capital:4.The ultimate residue, if any, shall be divided among the partners in the proportion in which profits are divisible. So, in short, all assets and liabilities of the partnership business have to be taken into account when calculating the final figures and each partner has to be paid what he invested in respect of capital. So I think she does have a point that all the assets including the stock has to be considered but you will be entitled under point 3 above to have repaid what you invested to make the purchase in the first place which ultimately means that you and your accountant are probably right. You need to make your point very clear in writing with all the calculations. Ultimately you cannot stop her from suing if she wants to take this further but your letter and the calculations will form the backbone of your defence. If you can show that she is acting unreasonably you may be able to recover your expenses for defending the claim even though this is a small claim.
Customer: replied 2 years ago.
Ok thank you. So really as long as everything is included in the accountants report then she cannot have anymore than that. I have been trading as a sole trader since 03.01.2016 so anything after that has not been included.
Customer: replied 2 years ago.
Also, if they do go down the route of getting a solicitor(I think this may be an idol threat) she will be paying for this out of her own profits and no mine yes?
So long as everything is included in the accountants calculation and properly distributed, she will have no further claim. Any legal expenses she wishes to incur will come out of her own pocket or her profits not the partnership profits.
Customer: replied 2 years ago.
Brilliant, it's as I suspected but just needed piece of mind. Just one last thing. If I send the accountants calculations to the said solicitor will this be classed as a legal document and will the solicitors make sense of it because I can't. It all mathematical jargon to me but he has simplified it on the last page and the totals are clear. Would a solicitor have any reason to dispute this, all receipts and invoices are available if necessary. And.... In your professional opinion, do you think they would be better to take what the accountant had set out or pursue further?
Any solicitor worth his salt will understand the calculations and be able to advise the lady on the pros and cons of the case. Her claim can't be substantial and the more time she spends on professionals the more she will ultimately lose from her share of the profits. I can't see why the accountants figures should be disputed if he is credible and the calculations are supported.
Customer: replied 2 years ago.
Yes he's a creditable accountant and has been for 30 years. So basically she is getting back what she put into the business and half the profits which after 9 weeks of trading you wouldn't expect to be much. So I think that's fair. Thank you
My pleasure . Please remember to take a moment to rate my answer so that I am paid for my time. Have a good day. Alice :)
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