Starting a partnership- my address...

Kaz2904

Hi there, I have searched for a while and don't seem to be able to find the answer to this.
DH works in a certain industry and last year his boss hired a new employee as business manager. The business started to skyrocket under DH and new chap. Then boss stepped in, stopped what they were doing and sent them back into the direction the business has been going in previously.
We don't understand how DH's employer is still going tbh, he gave all employees redundancy notice 12.5 yrs ago and then at the last minute, got a loan and pulled through. He's limped Long like this ever since.
DH and new chap get along very well. They both have very different skills but *gel. DH discovered new chap was on double his pay by accident after about 6 months. New chap had already mentioned going alone etc. Boss had started his usual mothering about money. To put into context, DH has been there 14 years. People come and go through being let go due to cost or quitting due to mismanagement. Bosses debt has got insane.
His boss gave new chap 2 months notice and he left Friday (yesterday). Boss spoke to DH and was very upset about it etc and said he was the best at the job etc. it's boiled down to cash.
Anyway... New chap spoke to DH a month ago and asked him to join him in business. Said he had a website virtually set up and had bought one of the machines used for specialised jobs in their area.
DH spoke to me and it's been something we have considered for years, his boss actually wanted to sell us the business 13 years ago but we couldn't afford it. I said he should go for it.
So as it stands....
New chap now jobless and has 6 months cash to tide him over.
DH still working there.
Website ready to go with some tweaking, artwork, products etc.
Both me and New chaps partner on board ( to help in supporting only, we have our own totally unrelated careers, I'm a nurse and she's a model and travel agent!).
DH aims to leave in April. He will do his part of the work in the evenings and weekends so will have 2 jobs for some time.

We have looked at various bits and realise they need to set up with HMRC and banks etc.
Address wise, they won't have a premesis. Maybe later but it's not necessary yet. New chap is renting his flat and we own our home outright (we're only young at 35/36 but worked our bums off to do so as DH's job has been so unstable).
If we were to register a partnership with DH and new chap being 50/50 partners, would my and DH's home be at risk? We are tenants in common on the deeds.
Would like to clarify that DH and new chap will not be taking any business from boss or using same business plan, they will go in the direction they had steered it towards earlier in the year. So we can all be clear in conscience that we haven't caused bosses business to fold (highly likely when DH leaves but he's paid as a junior member ).


Sorry for long post and TIA .

Savvy_Sue

Kaz2904 wrote: »

If we were to register a partnership with DH and new chap being 50/50 partners, would my and DH's home be at risk?

I believe so, yes. In a partnership, debts can be pursued against either / any partner. You probably need to set up a Ltd Co, but even then you may not be entirely safe because if a director acts recklessly then they can be held personally liable, AND you're unlikely to get credit for the company without giving personal guarantees. That's a very short layman's summary ...

I'd suggest phoning round a few accountants for some advice on setup. I'd also strongly recommend that both parties get independent legal advice on any agreement: profit splits / work splits / how to close the business / how to deal with disputes. Spending time on that while you're all friends will save much pain and anguish should you ever fall out.

As for the address: there are several aspects to that question. The specialised machine must be somewhere: if it's in the other chap's rented flat does he have his landlord's permission to run a business from there? If not he might suddenly find himself homeless. Insurance might be another issue for him.

The 'address' you need for business purposes however, is the address at which documents can be served - and if you engage an accountant you may be able to use their address.

CKhalvashi

Savvy_Sue wrote: »

The 'address' you need for business purposes however, is the address at which documents can be served - and if you engage an accountant you may be able to use their address.

My accountants' address was the registered address of the company for a few months last year, whilst we were in the process of switching business premesis.

The same address (residential) is also the address used by the other director as a point of contact, and I use an address (in my home country), that is one I haven't been resident at since I was a child.

As long as HMRC have your home address, and you're paying any relevant taxes (I'm non dom, but I make it clear regarding residency in the UK when the tax return is done), there is no regulation at all on this.

The point Sue mentioned regarding the commercial use of a residential property (my business was started with recording studio in my living room) and landlords consent/insurances is a very valid point, however, and will need to be cleared up.

CK

paddyrg

Sue's on the ball. Partnerships don't mean liabilities are split 50/50, they mean they're 100% on both partners. Yes your house is on the line, and whilst the other guy is bringing a machine into the business, you're bringing hundreds of thousands of pounds of security. It's not equal. If one of them borrows £100k for the partnership and spends it on fancy hotels and a company Lexus (as sales staff often feel they need and deserve), whilst the other partner is doing all the paperwork and walking in leaky boots, they are still equally liable when the debt is called in. The lender doesn't apportion £50k to each partner, they go for whoever can pay.

Limited company is the way to go, most likely, as at least you can balance what each partner is investing, and you don't have to risk your home. Again though think hard about the 50/50 setup, that can create stalemates, although they're less grief than in a partnership. If there's a third investor, even a minority one who is silent until a stalemate needs a deciding vote, it can make things less fraught.

Most important is all is to realise that any agreements now will get tested once there is hard cash on the table. Contracts are a chance to decide in peacetime how you will resolve things in time of war. Go thorough all the eventualities (sickness, leaving the area, retirement, making too little and needing second jobs, death, needing cash injection to repair kit, attitude to company savings vs dividends, etc. Literally every circumstance you can imagine). The process of doing this and documenting it is the basis of the agreements between the directors/partners and some minor discomfort discussing this stuff now will save severe tears once there is cash involved.

Kayalana99

End day though it doesn't matter if the house is used as the business address - your partner would still be sought after for debt using his assets regardless. (I.e house)

As long as they don't take any loans out though I wouldn't be worried? (Or loan as in credit agreements with another company)