“Help! I want to jump ship”

"I’m going to assume that you have not been trading through the medium of a limited company. On this basis, you and your colleagues are trading in partnership. I’m also going to assume that you don’t have a formal partnership agreement.

"Legally, your partnership is what lawyers call ‘a partnership at will’. This means that the partnership will continue as long as all the partners so wish. If one of you wishes to bring the partnership to an end, then you can do so, on notice – a matter of hours or perhaps even less.

"So, bringing your partnership to an end is relatively easy!

"The more difficult process is the ‘winding up’ of the business. The Partnership Act 1890 provides the framework of how this should be conducted. In short, all assets of the partnership are required to be realised, the creditors paid before distribution of any remaining surplus is made to the partners. The assets include, for example, the name of the business and its intellectual property.

"While the winding up should be conducted in an orderly manner, it often tends to be a ‘free for all’. lndividual partners attempt to highjack customer lists and contacts and even the name of the partnership. This can lead to lawyers becoming involved at a very early stage and sometimes court proceedings with injunctions being sought to bring order to the process.

"The lesson? Always, always enter into a properly drawn partnership agreement – it’s the constitution for the business. It will provide for the admission of new partners and retirements including all the attendant financial consequences. Issues as to ownership of property, whether freehold or leasehold, will also be included.

"Trading without a partnership agreement is a high risk strategy. Patience and an experienced accountant are probably your best aids at this stage!"

Graeme Jump is a dispute resolution partner at North West law firm Mace & Jones. You can contact him at: graeme.jump@maceandjones.co.uk or call Mace & Jones dispute resolutions teams in Manchester: 0161 214 0500 Liverpool: 0151 236 8989 Knutsford: 01565 634234.Picture source

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