WA Business Partnership Fallout - What to Do?

[Rod]

Firstly, whatever evidence proves you were 50/50 partners. Secondly, evidence showing he kicked you out and that you didn't voluntarily leave. All with dates.

Hard to second guess someone when I know so little. Some possible avenues come to mind.

1. You voluntarily left
2. You sold it for nominal value to him
3. You were mismanaging the business
4. You were never partners to begin with
5. You gifted it to him
6. Other

 

[DMQC]

If I were in your position, I would do the following:

1. Give the other partner written notice of my intention to leave the Partnership
2. Request the assets of the Partnership be sold or distributed accordingly.
3. If the other Partner will not play ball, apply to the Court pursuant to the Partnership Act (differs form state to state) to have the Partnership wound-up and an administrator appointed. The administrator will then wind up the Partnership and distribute the assets accordingly.

Hope that helps

 

[Hoang Trang]

Firstly, whatever evidence proves you were 50/50 partners.
Secondly Evidence showing he kicked you out and that you didn't voluntarily leave.
All with dates.

Hard to second guess someone when I know so little. Some possible avenues come to mind.

1. You voluntarily left
2. You sold it for nominal value to him
3. You were mismanaging the business
4. You were never partners to begin with
5. You gifted it to him
6. Other

Good points. Well there is no disputing we were not partners but anything is possible I guess? Been through the family law system so dealt with my fair share!

We have been in partnership in this business for 14 years. Both our names are on the business and pretty much on every trading accounts/registration etc. The end of year partnership distributions are split 50%.

This is on paper ( tax returns ) but in actual fact I never received my equal share all the 14 years and hence the fallout. I was forced out as in he changed the locks, stopped receiving weekly drawings and any profits. Business is still trading 6 weeks post fallout and I even received my latest PAYG installment for last quarter.

From what I gathered so far my best option is to get a lawyer to draft up a letter stating my intentions to dissolve the business. Requested a valuation and seek 50%. Failing to this then proceed to court? Or ideally mediation to try and settle.

This all has been planned for awhile without my knowledge. One month prior to our fallout he set up his own separate family trust and started trading half the turnover through that. So essentially the business turnover is significantly reduced now. I'm guessing when it comes to the valuation the net worth will be a lot lower and therefore reduced payout to me? Surely the valuator and courts can read between the fine line?

 

[Hoang Trang]

If I were in your position, I would do the following:

1. Give the other partner written notice of my intention to leave the Partnership
2. Request the assets of the Partnership be sold or distributed accordingly.
3. If the other Partner will not play ball, apply to the Court pursuant to the Partnership Act (differs form state to state) to have the Partnership wound-up and an administrator appointed. The administrator will then wind up the Partnership and distribute the assets accordingly.

Hope that helps

DM

Great info, thanks. How do business valuator works? Asses the value based on turnover and profit I guess?

 

[DMQC]

The administrator will value the business based on previous earnings over the past few years, however you will only get 50% if the assets at the time the partnership is dissolved. So the business wouldn’t be “sold” which is a shame since goodwill etc. can be worth a significant amount.

Your best bet here, given it is very complex and what the other partner done may see him liable for a lot more than he bargained for, I.e compensation to you for losses suffered both past and future, you should get a lawyer to help you through the entire dispute. You have a legitimate dispute, might as well go the whole hog and get what you’re entitled to - some firms do “no win no fee” for commercial litigation, look around for one of those if you don’t have the funds to pay a lawyer upfront.

 

[Hoang Trang]

The administrator will value the business based on previous earnings over the past few years, however you will only get 50% if the assets at the time the partnership is dissolved. So the business wouldn’t be “sold” which is a shame since goodwill etc. can be worth a significant amount.

Your best bet here, given it is very complex and what the other partner done may see him liable for a lot more than he bargained for, I.e compensation to you for losses suffered both past and future, you should get a lawyer to help you through the entire dispute. You have a legitimate dispute, might as well go the whole hog and get what you’re entitled to - some firms do “no win no fee” for commercial litigation, look around for one of those if you don’t have the funds to pay a lawyer upfront.

Opened a whole can of worms. So theoretically the most favourable outcome for me would be a forced sale of the business if he could not afford to pay me share? As the administrator will not account for goodwill?

 

[DMQC]

Not quite.

If you forced a sale you couldn't account for the 'goodwill' if the goodwill is now associated with the others partners new business. You will only get what someone will pay, and if the business is now trading under the other partners trust, nobody could buy the business? If that makes sense?

Your best bet is to get a lawyer - not kidding, even a low profit margin over many years can add up to be a substantial amount, any claim over $70k goes through the state supreme courts, so not something you want to go into unrepresented - possible, but not advisable.

Your 'next best bet' is difficult to say without full knowledge of the situation, however from what I can understand of the situation, I would -

1. Attempt to contact the other business partner, offer one last chance to arrange an amicable resolution to the situation before you seek legal advice. They may be willing to pay an acceptable amount to have this over with.

2. If unsuccessful, I would send a letter to the other partner advising of my intention to leave the partnership and advice a letter of account which I expect to be paid will follow.

3. Gather up all of your accounting information, figure out what you want $$ wise, send a letter demanding that amount with x days.

4. Commence proceedings at the Courts if the partner did not reply.

 

[Hoang Trang]

Not quite.

If you forced a sale you couldn't account for the 'goodwill' if the goodwill is now associated with the others partners new business. You will only get what someone will pay, and if the business is now trading under the other partners trust, nobody could buy the business? If that makes sense?

Your best bet is to get a lawyer - not kidding, even a low profit margin over many years can add up to be a substantial amount, any claim over $70k goes through the state supreme courts, so not something you want to go into unrepresented - possible, but not advisable.

Your 'next best bet' is difficult to say without full knowledge of the situation, however from what I can understand of the situation, I would -

1. Attempt to contact the other business partner, offer one last chance to arrange an amicable resolution to the situation before you seek legal advice. They may be willing to pay an acceptable amount to have this over with.

2. If unsuccessful, I would send a letter to the other partner advising of my intention to leave the partnership and advice a letter of account which I expect to be paid will follow.

3. Gather up all of your accounting information, figure out what you want $$ wise, send a letter demanding that amount with x days.

4. Commence proceedings at the Courts if the partner did not reply.

Thanks mate. Bloody sneaky and calculated he is. Screwed me over essentially halving the business, assets and profitability. Hoping the administrator doesn't take this as face value. They will asses value at the time I was forced out? 2017 financial year was still trading as one business.

 

[DMQC]

No problem at all. He sure seems that way, I am a firm believer in karma though, so hopefully he gets what he deserves.

The administrator typically gets a % of what is distributed, so it is in their interest to get the most amount of $ for the distribution.

It's tricky, you cannot be 'forced out' of a partnership, you are still a partner whether the other partner likes it or not. The administrator will only be able to distribute the assets, including goodwill etc., that is there at the time of the distribution, they cannot backdate it since there may not be the funds that were there before this whole fiasco. Hope that makes sense.

 

[Clancy]

Failing the good opinions so far... Another avenue could be to ask your ex to make a property settlement claim against you, then you simply report the exact truth about the business and lets see your brother withstand the family court.... Ha,,, Ha,,, Ha

You might not get anything out of it yourself, but what your children inherit from their mother one day could be vastly different. That definitely would make it worth doing!