Home business finance question

DBarker94

Afternoon all,

I have a question that is causing a major problem for my partner and I.
My partner runs a business breeding dogs. She has done this before I met her. She used to home thedogs off site and rented a small holding to do this.

We decided to move in together about 18 months ago. We rented a property that meant the dogs could live with us. We lived in this property for 12 months. We have recently moved into a new property which is £750 a month each including bills. In order to move we used credit cards to get a deposit together and to rent a van etc... It cost us £3000. Plus we have £300 each from the previous property still to pay. So all in all its £1800 each.

The plan was that we would rent this property and any profit earnt from the business would pay off debts first. My partner is asking for money each month to pay the credit card debt but I am already paying Approx £150 extra each month for the property we rent in order to have her dogs on the property. she doesnt think I pay anything towards to the debt we owe but i think I already pay money each month in the rent towards the dogs.

What do people think? Its causing major arguments and I need to find a solution....

FireWyrm

Stop treating your joint finances as separate. The bottom line is that as soon as you started renting a property together and living together, you became financially linked whether you like it or not. There is no such thing as a bachelor lifestyle any longer. The best advice is to simply sit down with the bank account print outs and a calculator and start establishing how much comes in, how much goes out, what the business earns, what the expenses are and what debts exist. Once you understand that, you can start to plan a realistic budget and try to get ahead of the debt.

or, you could just walk away, or just pay rent to her and keep your finances entirely separate but I wouldnt plan on being her 'partner' much longer.

Tixy

My partner is asking for money each month to pay the credit card debt

Do you mean asking your for moneyfrom your own earnings (presumably you each keep your income in seperate bank accounts at the moment)? Is it to pay off her credit card debt of £1800? or towards both your cards? (is the debt split so some on cards in your name and some in cards in her name)

The plan was that we would rent this property and any profit earnt from the business would pay off debts first.

Is this your partners only source income? How much profit is the business making a month?
How does that compare to the £750 she needs to contribute towards the household bills, her personal essential bills and the minimum payments on the credit cards?

but I am already paying Approx £150 extra each month for the property we rent in order to have her dogs on the property

So in the last property you lived in the dogs lived with you? and they still do now?

DBarker94

When we lived apart I paid rent of £650(inclusive of bills). We moved in together and the rent went up to £750 each. We keep our bills and incomes seperate and have one bill account for the house. The debts are on various 0% cards in her name. We both work our own jobs and the dogs are an extra. The dogs profit are not monthly but it works out to be around £10k per year.

snowcat75

Turnover or profit? if your both paying £150pm extra that's already £3600 from the top, Id suspect there is over expenses (food, vets fees, etc) that haven't been addressed, If the business inst capable of paying back borrowed capital its not a business, its a lifestyle choice/ hobby etc.

What should happen or must happen, IS the "business" needs to run a set of books no matter how basic, then how you divide personal incomes is up to you.

DBarker94

Basically the business has profit of £10k every year. The costs for food, vet etc is accounted for in this. I think I am contributing to the business by paying the extra rent on the house to accomodate the business in the house. However my partner disagrees and says its the cost of living with her. We have lived together for 18 months and so I think I have paid £1800 into the business. The extra rent being £100 per month compared to a smaller property we could have lived in if it were not for the business.

Prothet_of_Doom

There are 2 issues. One will require some basic tax advice from an accountant, or perhaps the HMRC website or even here.

the other is about how it works as a partnership.

1) A proportion of the costs of your rental can be offset against the tax, because part of that business is using part of the residence. In basic terms if you have 5 rooms in the house and one is used as an office for a business, 1/5th of the costs of the house and heating can be offset against tax. Now how you proportion that when the dogs are outside I'm not sure. Hence reading up on what the HMRC will and won't allow or talking to an accountant.
In my oppinion, your partner was renting a small holding before, and your rent is £150 more, than if you didn't have room for this business, so I'd take those 2 figures and 'charge' the business the average between them, to offset against tax. When your partner does her self assessment in Jan 2016, for the year about to start, she'll see a reduction in the tax she has to pay.
What to do now.
You need 4 bank accounts.
1) A business bank account. (or a separate personal joint account) with a linked savings account. Put 1/4 of all turn over in the linked savings account, pay all bills relating to dog business, put all income relating to it in it. Keep records of miles travelled (to reclaim at 45p a mile etc) Pay fixed monthly ammounts (drawings) to your partner and your accounts.
2) and 3) Individual accounts.
4) a joint house hold account. All bills relating to house paid from this. Both put identical ammounts into it from 2 and 3

When you are ready, when you trust each others financial judgement, then you can dump the individual accounts. You are not married, there is no legal commitment financially, so you've got to have a little separation in my oppinion.