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JimLawyer
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I'm looking to go into I’m looking to go into business with

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I'm looking to go into I’m looking to go into business with someone and I will be putting in 40k of my money into the venture. The business will be a 50/50 partnership.The idea is to take my loan money back out when the company starts to make a profit over a period of time.I’m being rather generous by going into a 50/50 agreement whilst being the person who fronts the initial money and therefore the risk. I Intend to be reimbursed for my risk through interest on the loan.My question is, what type of water tight, legally binding agreement/contract can I get my business partner to sign to personally pay me back 50% of the loan in 6 months or if the business fails?
JA: PayPal, Debitcard or credit card are all fine.
Customer: What?
JA: What state are you in? And have you consulted a local attorney?
Customer: I'm in the UK. I haven't taken official legal advice as of yet.
JA: Has anything been officially filed? If so, what?
Customer: It's early stages, no money has been exchanged.
JA: Anything else you want the Lawyer to know before I connect you?
Customer: Do you have a UK based contract lawyer?
Customer: replied 6 months ago.
For your info, I'm based in the UK

Hello, this is Jim and I am a dual-qualified lawyer (UK and Republic of Ireland) and happy to help you today.

If you do nothing, you still have a partnership under the Partnership Act 1890 - so you are both liable for 50% of the debts and also own 50% of the business (your partner has a claim on your up front payment too). The way around this is to ensure you have a partnership agreement drawn up to say that in the event of you leaving or within 6 months as you have said, you get your investment back. You can tailor and download a partnership agreement at the following site:

www.lawdepot.co.uk/contracts/partnership-agreement/#.XiBl-8j7TIU

The document should be signed and witnessed as it would be a legally binding agreement. This is all you need for your purposes - it would be used in court if there was ever any dispute.

I hope this helps – if you can please give a positive rating by clicking 5 stars (at the top of your screen), I can answer any follow up questions at no extra charge and I will be credited for helping you today.

Many thanks,

Jim

Customer: replied 6 months ago.
Thank you for the advice. In what way will my partner have a claim on the upfront loan?What is the main clause in the partnership agreement that will make my partner personally liable to pay back 50% of the loan on the eventuality I leave the business or in 6 months?

If you have no partnership agreement, you both own the assets equally (which includes the £40K). That is why it is so important you have an agreement which clearly refines your rights. You can add in a clause for when you leave the business or in 6 months - you can add in a paragraph for "reimbursement" - as long as something is in the partnership agreement then you are protected.

Customer: replied 6 months ago.
in summary, we can a set up a business, I can loan the money to the company but with a partnership agreement, we can stipulate a reimbursement clause making my business partner personally liable to pay me 50% of the loan even though I loaned it to the company?

Yes, he would provide you with a promise to indemnify you (to pay you back). You are spot-on with your summary.

I hope I have answered your question. Let me know if anything requires clarification. In the meantime if you could either leave a star rating, or reply “yes”, I would be very grateful.

Many thanks,

Jim

Customer: replied 6 months ago.
Brilliant. While I got you, I'm going to run through the partnership agreement to ensure I'm selecting the right things. Reference Profit and loss, should it be distributed equally, in proportion to capital contributions or fixed percent?
Customer: replied 6 months ago.
How will assets be distributed when winding up your partnership? Equal share for each partner, in proportion to capital contributions or fixed percent?
Customer: replied 6 months ago.
In addition to the income tax report, what other reports do you want to include in your annual report to partners? See screenshot.
Customer: replied 6 months ago.
Who can bind your partnership in contract? See screenshot

Hi, any chance you can rate the answer first (the initial question was about which agreement to use).

Thanks

Customer: replied 6 months ago.
Happy to rate, but does that mean additional questions are an additional fee essentially?

Hi, the question was about the type of agreement which has already been answered. Further questions about content ideally need to go in another question (if you're a member then it won't cost extra to post new questions).

  • Profit share - equally
  • Assets to be distributed - proportion to capital contributions
  • Annual reports - you can include all of these - they are helpful when it comes to assessing tax and how healthy the business is.
  • Bind partnership - either of you can do so - you are a two man band so tick the first option (any partner) and unanimous
JimLawyer and 7 other Law Specialists are ready to help you
Customer: replied 6 months ago.
VERY KIND OF YOU!!