Disolving a partnership

[sheryl]

I am in the process of trying to end a LLP partnership. My business partner was offered the opportunity to join another partnership, where in exchange for merging our clients he received a 30% stake in the new partnership.


I felt our current situation wasn't working, so agreed that I would leave the partnership. We have now drawn up our final accounts which shows my capital account as overdrawn and my former business partner wants me to take a larger share of the profit from our last trading period to make my capitalaccount up to zero. This will of course result in a much higher income tax bill than I was anticipating.


There has been no mention of him "buying" me out of my share of the partnership (which I feel I should be entitled to as he has taken all our clients and has received a 30% share of another successful business in exchnage for this). Would I be entitled to this even though I have an overdrawn capitalaccount? and if so, how would we go about placing a value on my share and what would be the tax implications?


We have got a partnership agreement that says that if the partnership ends, it should be divided in line with what we each contributed, but where does that leave me if I have a negative capitalaccount (resulting from taking more drawings that the profit I was allocated)


Should I just take a hit on the tax to square up my capital account and cut my losses?

 

[hellen]

Hello friends


Dissolving a Business - A corporation or other business entity may cease operations for many reasons and in a number of ways. When a business is terminated or its legal status changes, there are licensing and regulation requirements which must be met. There are also opportunities for improving the economic prospects at termination for owners and creditors through legal provisions of state and federal laws.


Thanks to all friends

 

[stepheny]

If all terms of the dissolution are agreed then a deed of dissolution can be drafted to dissolve the partnership. If partners cannot agree then either partner can apply to the Court to have the partnership dissolved. There is no guarantee that by going to Court you will get what you wish and costs will be factored into the dissolution.


Happy to advise further by email


Jonathan