Help - Advice on Business Partnership and Liability Needed!

anniep9999

Help please!

My partner has been self-employed within the construction industry as a "sole-trader", he has decided to effectively go into business with his brother and they are currently in the process of setting up bank accounts etc. I have been revewing the types of "partnership" arrangements and would like advice on potential liability.

Whilst I believe I understand within a "general" partnership the individuals are jointly and severably liable for the business debt I would like to understand if the same applies to existing personal debt.

Basically, whilst getting back on track now his brother has experienced some financial difficulty and was not as responsive to his creditors as he should have been, thus meaning he now has aged debt I believe they are pursuing him for (delicate don't know precise detail).

If my partner enters into a "general" partnership with him and thus becomes "financially linked" does this is anyway tie him to his brothers existing personal debt and make him liabile, i.e could his assets be utilised to recover this in any way?

Obviously I have a vested interest in that myself and my partner are financially linked and own a property!!

Any help / advice gratefully accepted.

Thanks

Horace

As I understand it then the HMRC class all monies including personal as being part of the business if they set up as a sole trader and possibly a partner, the way to limit this would be to set up as a limited company.

Further advice can be found for free from businesslink.

paulwf

Partnerships are best avoided anyway, let alone when one of the parties is in debt.

Starting your own business generally involves having some cash reserves to get through the start up period, or at the very least not having any debts so that you can get through lean times. Having a business partner with aged debt instantly puts the viability of the business at risk.

Get your partner to set up a business as a sole trader and employ your brother...much more straightforward for everyone.

hippyadam

anniep9999 wrote: »

Whilst I believe I understand within a "general" partnership the individuals are jointly and severably liable for the business debt I would like to understand if the same applies to existing personal debt.

No. Only to any future liability the partnership may incur.

anniep9999 wrote: »

If my partner enters into a "general" partnership with him and thus becomes "financially linked" does this is anyway tie him to his brothers existing personal debt and make him liabile, i.e could his assets be utilised to recover this in any way?

Again no. However if i was going into business with someone who "wasn't as responsive" to creditors as he should have been that would still worry me...

Have you looked into limited liability partnerships (LLP's)?