Frequently Asked Questions

Business or Company Partnerships formed when more than one person forms a business and they divide the profits of the business between them. This is not always done equally and many companies have junior and senior partners where profits are allocated based on seniority and length of time with the company.

They are normally split 50/50 and there may be tax savings due to the fact that partners are entitled to the first £6475.00 of earnings each tax free.

When these companies get into financial trouble, it is usually relatively simple to offer a proposal to creditors due to the business and personal life being so closely linked. If the partners are facing bankruptcy of their jointly owned assets and personal assets of the business are the basis of bankruptcy.

Unfortunately, if the company fails and the assets are insufficient to clear the liabilities of the debts, then these become debts of each partner on a joint and several. This means that if a partner has no personal assets and others do then the company’s creditors may pursue the personal assets of partners for all debts of the business. The partner that has no assets can apply for bankruptcy and walk away from the company.

Business partnerships that have experienced difficulties can solve their problems by proposing a Partnership Voluntary Arrangement (PVA). This can be structured so that the personal assets and liabilities of each partner are confined, but knowledge of insolvency is necessary and it does depend on the individual circumstances of each partner. The partnership continues to trade and when the partners have received enough for their living expenses and tax liabilities the remaining profits go to creditors of the partnership.

It is also possible for a partner to be insolvent, but the partnership itself to be perfectly viable. This usually arises when one partner has personal problems unrelated to the company. An Insolvent partner may propose an IVA to include his / her personal responsibility, but the creditors of the company must also be notified even if the payments are current. A personal insolvency partner would normally lead to the dissolution of the partnership.

There are many more angles to partnerships and you should always seek advice if in doubt.

We do not see it as our place to tell you what to do, but to explain your options and how everything works and let you decide what is best for your business.

Call us now on 01472 254914 for free no obligation expert advice.