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Need urgent advice about leaving a partnership gone bad!Business Community Home > Business Law Forum > Business Closures / Disputes Forum |
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| Original Message Added : 20 Jun 2012 In 2009 I started a business with my ex-partner. Basically, I had the ideas and know-how but not the funds. We started a US based business as I was in the UK and the partner in the USA and the formal legal arrangement then was a 50-50 share of the LLC. Share certificates were never forwarded to me. My partner was not comfortable with a UK based business. We split the work into the US side handling the internet store, accounting and US sales and me on the UK side handling product testing, supplier vetting/finding, bulk sales of EU origin products and any UK based business. Initially I helped do the web store, set up the US side and all the other tasks, as well as gave the company a working formulary since we made our own products. The business name and logo were also designed by myself. Time passed and the first year we made a loss. My business partner got tax refunds on personal income taxes due to this and the accountant ( books had to be re-done twice due to errors) said I had 9% share of the equity because I had only put in 9% of the capitol contributed that year. The second year our sales jumped to about 130K due solely to my bulk sales which were done to US trade clients operating out of my UK home. My phone expenses were only partly paid that year! We also made a loss according to the accountants and again there was a US tax refund issued to the other partner and I got the tax form saying I now had 7% due to depreciation. In the second year all the money I had put in was paid back as expenses to the sum of a couple thousand pounds sterling. I have never been paid from the business. Two persons were hired on the US side in the second and third years to handle bookkeeping. This failed to do any work and now at the end of the third tax year there are no books, no records at all, and another person was hired to get the books in order ( yet another late filing fine). Again sales for the third year should run to about 150K from my estimates but there were many debts which would not explained except by the fact that the profits ( usually 75-100% on each sale) were used to buy stock , pay workers and rent in the US. This is an internet based business! Last tax year an agreement was made to pay each owner 5% of any profit from bulk sales (i.e. sales done by myself). This was done to make we each had money to cover the taxes due on the profit income at the end of the year. I was doing a doctorate and working an extra job during the last two years. Some of that income was put into the business and has not yet been repaid. Also I understand that the business paid thousands per month for workers in the US base who were obviously not doing any work/ not working according to plan! In the end of December 2010 all the money in the business accounts was spent just before the new year so that it would look like yet another loss was made. There was free cash in the accounts to cover debts etc but instead the US partner and staff bought stock and assets ( some of which were returned for a refund in Feb 2011). I indicated in October of 2011 that I could no longer be a part of the business, especially since it was "apparently not profitable", no records could be accessed by myself and the bank account information was not in my possession. There was a major mis-step made in 2010 to lease a property in the US for 24 months whose rent could not be paid without incurring debts elsewhere. This property , as well as a couple company credit cards, were secured by the other partner from personal home equity even after my warning not to do so. At this point I am working with another company I formed and stopped any business for the previous company. I have been told by them that this is not a fair practise and I am in breach of the initial agreement. Apparently their lawyers are still drawing up the legal documents ( 9 months later) and I am to sign legally binding agreements not to have any company with the same products in a 10 year period. Additionally, I am also being told that the formulae written by myself are the company's property and I can have no access to them. This is without a previous confidential agreement or any payment being made to myself for that work and a failed attempt to copyright the book of formulae. Now, I want to write to the state authorities asking for my name to be removed from the company's official records. I was very recently told there is a huge company debt which I am 50% owner of since I own 50% of the company. Is this correct since from the tax statements I only have 7% of the equity from 2010-2011? Can I be entitled to 7% of the assets/profits but responsible for 50% of the debt? The business is asking me to help them get a small business loan to pay off the debts and have operating capital and then they will be happy to get the leaving documents signed? This could not be right? I feel as if I am being held until the company becomes profitable and then I leave with nothing after all the hard work. The income from my work has been consistently about 90% of the company income. Is there anything else I should be doing except writing my grievances to the business and asking for the removal of my name as an owner? The other partner has indicated filing for bankruptcy which I am not in favour of. It is being claimed that the company does not have enough assets to cover the 15k debt it is now in but there is no proof of this. Advice please! |
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| Reply : 22 Jun 2012 |
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| Reply : 22 Jun 2012 I was never given share certificates and according to my source ( family who have been in multiple business for many years) this in retrospect was a good thing. The issue with US bankruptcy is that your name goes on a list...what they like to call the black list...for 10 years and it is difficult to then open a new business and get credit. I will keep trying to get a lawyer. I only wish they would respond to enquiries! |
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