Hello, I would be extremely grateful for any advice please as I am having a very difficult time at the moment. I and my business partner set up a LLP in December 2007 and are having to dissolve the partnership due to irreconcilable professional and personal differences. Basically, my partner has failed to input any financial investment into the business despite a verbal agreement to do so.
She announced on the day we opened the bank account that she "had no money" having agreed beforehand for us to put an equal nominal investment into the account to cover set-up costs. This put me in a very difficult position having to invest twice the amount I had budgeted for, but her promise to pay some of the bills as we went along put my mind at rest.
This promise however was also broken and the business has struggled on up-front customer payments, favours from my husband and my diminished personal investment. I could perhaps have forgiven this if I had thought her plight to be genuine but she has had a fortnight holiday to New York and a new car during this time neither of which I have been able to afford! I have also had to do all of the legal, financial and admin work together with the majority of running the business on a day-to-day basis while she has worked part-time.
I have tried to be extremely patient and tolerant but my partner announced in October that she wanted to get a full-time job and would therefore only be able to do anything for the business in the evenings and at weekends expecting me to throw in the towel having set everything up for her. This I was not prepared to do as I have invested too much time, effort and passion (not to mention money!) into it.
We agreed to dissolve the partnership as I could not carry her any longer and I said that I wanted to continue trading as a sole trader as I had built the business name up from nothing. She still refuses to cover any part of the debts accrued by the business and says that I am unable to trade as a sole trader using the existing business name (without the LLP) without buying her out.
Although we set up a LLP to limit liability we did not draw up a Partnership contract.
Please can you let me know where I stand as I have been left with the debts, liabilities and the prospect of having to buy her out which I can ill-afford to do. Many thanks
The lack of contract makes this more complex than it need be.
You have no choice but to dissolve the partnership it is automatic in an LLP where only one member is left after the other one leaves. The LLP remains liable for the debts subject to the limitation and so depending on who is a creditor and the extent of the debts and whether they are seen as LLP debts or personal to either of you further action may be taken to recover.
As for the use of the name, she is right, it is both unwise and complicates things to use a similar name. Much better for you to use the experience and contacts if possible to move on as a sole trader without this hassle. You need to take advice over the debt issue now.