Removing a partner from a business

[capfits]

Surely this will all be reflected in the respective partners capital accounts which will be taken into account should try partnership dissolve at some point.
If we are all partners in a business surly we big enough and grown up enough to respect each others personal choices. We all above different tastes and things like family have different requirements like a car at time of a child learning to drive for example.
Some of you will have say an Audi Q5 whilst another partner will have a Kuga and a better holiday or 2, choices choices.
If the drawings are truly affecting the business prospects or not being properly apportioned then that does need sorted out.

 

[Goweresque]

Surely this will all be reflected in the respective partners capital accounts which will be taken into account should try partnership dissolve at some point.

Trouble is its a family partnership, so there could well be pressure brought to bear to make the OP forgo his due.

Lets say one parent passes away and there is a natural point at which to pass assets over and for the surviving parent to retire from farming. The partnership is dissolved. The surviving parent and the estate of the deceased would not want to enforce their share of any debt, its just adding to the value of their estate. If they make the debtor pay, then IHT will be due on it in the deceased's estate, and the survivor can only give it away subject to the 7 year rule. I'm sure an accountant would suggest it was better to write off the debts as the partnership is dissolved. Which leaves the OP out on a limb. He would be under heavy family pressure no doubt to not demand his share of any money owed, as he's just inherited a valuable chunk of land, and making the brother pay is going to cause strife, especially if he hasn't got it, and at the point one parent has just died.

If it was me I'd want to know where I stand now, while everyone is hale and hearty. If its left until someone dies thats the worst point possible for money issues to be raised.

 

[Walterp]

I am chuffed to bits to discover that Neil's family's solicitor was accustomed to dish out the same advice as me - a man after my own heart. I thought I was the only one saying such un-legalistic (but realistic) things.

Forget lawyers, accountants and, even, the inestimable Sian Bushell.

The nub of this is that it is not a partnership problem, it is a function of family dynamics. Who knows what might happen if the uneasy equilibrium that exists at present is disturbed?

Add in what seems, to me, unrealistic expectations of the OP and I can easily see a scenario where he, and not the brother who is actually running the business, gets the boot.

Conclusion: the only person who needs to be consulted is the father.

And I suspect what he says, goes.

Good luck, and take a tip - stop moaning about your sister in law, it merely makes a bad situation much worse. Just be grateful you are not married to her, as she is evidently not to your taste; then reflect on what this might suggest about the family dynamics.

 

[Will Wilson]

I have just worked out that based on the UK's average salary after tax I would need to work 42 years (a whole career) without spending a penny to save £1m. So I lost a bit of interest in your woes over a £5m inheritance.

 

[Clive]

not read all the thread but who owns the assets ? they hold all the cards here ! and its them that need to sort this out before it becomes a business destroying issue I+(It will if unchecked)

you cant simply throw a partner out unless you have a partnership agreement that outlines this scenario

but you could dissolve the partnership and start a new one without your brother in it ................. but that will upset parents and cause massive family issues


alternative maybe to become a limited, agree a salary and dividend structure that everyone will have to stick to, or I guess there is nothing stopping you adopting such a structure as a partnership really especially as you and your parents form the majority

remuneration of family needs to be formalised IMO and not just an open cheque book for anyone to dip into at any time - that will always causes issues

I have always had a wage (salary inc house car and bills package) from the farm business and have never written personal cheques through it but fortunately I don't have siblings in the business to worry about either, if I had I would probably not have got involved in the farm

 

[Windturbine]

Just a bit of an update as not been on in a long time, after a big fall out last week my brother has now decided to quit because "he has had enough" citing that all he wants is stuff signed over to him so he can run the business in the way he wants, I think sidelining me but I have no proof of that ! Where do me and the two other partners stand regarding this situation, he is only a partner in the business and I don't think he would be entitled to a pay out or if he is it wouldn't be very much ! Any advice on this difficult situation would be good !

 

[curlietailz]

I think Doingitforthekids has a good suggestion
Take an equal amount out of the business and if you want to, put it back in as a Capital loan/injection
Then your capital account will increase and his will decrease.

Although I don’t know how the tax situation would deal with that ??

 

[ollie989898]

Make it plain that the situation changes for the better or you break out of the partnership.

I would not put my life's work into a business if someone else was taking the pish, irrespective of how much money was at stake.

 

[ollie989898]

Just a bit of an update as not been on in a long time, after a big fall out last week my brother has now decided to quit because "he has had enough" citing that all he wants is stuff signed over to him so he can run the business in the way he wants, I think sidelining me but I have no proof of that ! Where do me and the two other partners stand regarding this situation, he is only a partner in the business and I don't think he would be entitled to a pay out or if he is it wouldn't be very much ! Any advice on this difficult situation would be good !

Tell him that is the best suggestion he has had in a long time. For it to happen though he needs to buy you (and your parents) out of the partnership. Does he need the number for a good auctioneer to come and value the business?

 

[Doing it for the kids]

Exactly. If he wants to do it his way, let him, just get the cheque book out and buy you all out, which i guess is a non starter.

The trouble now is the damage done. Unless you can carve out areas for you to work with no cross over it sounds like someone has to go?

I feel for you, family Bussiness have huge pros and cons seldom appreciated by those peering in

 

[2tractors]

Don't see how he can both quit and run the business the way he wants. Assuming the parents own the land the business could be brought to an end using the capital accounts to give each partner their share, given what you said earlier the brother would have the least if he has been taking high drawings for years.

At that point the parents would be in control. I suggest they bring in an independent facilitator and the family draw up future options. These could include selling the lot and everyone goes their own way or splitting the assets between the brothers after ensuring the parents have the means to have a comfortable retirement, including provision for future care fees should they become necessary.

Yes there will be need for accountants and solicitors who will cost but you can't take it with you and having this eating away at everyone can't be good for all the generations involved.
If the family can't sort this it will end up with lawyers who will be the only winners!

 

[Windturbine]

Don't see how he can both quit and run the business the way he wants. Assuming the parents own the land the business could be brought to an end using the capital accounts to give each partner their share, given what you said earlier the brother would have the least if he has been taking high drawings for years.

At that point the parents would be in control. I suggest they bring in an independent facilitator and the family draw up future options. These could include selling the lot and everyone goes their own way or splitting the assets between the brothers after ensuring the parents have the means to have a comfortable retirement, including provision for future care fees should they become necessary.

Yes there will be need for accountants and solicitors who will cost but you can't take it with you and having this eating away at everyone can't be good for all the generations involved.
If the family can't sort this it will end up with lawyers who will be the only winners!

Hi just as a reply to this, in the last year end accounts brother actually owes the business money, so I don't really know what he thinks is going to happen, I feel no guilt over this situation as I have done nothing wrong, I would just like it sorted out

 

[dannewhouse]

you need to sort it this year then, by next he will owe a lot of money and I dare bet you wont see it!

 

[Goweresque]

What do your parents think about all this? Have you discussed it with them?

 

[2tractors]

Hi just as a reply to this, in the last year end accounts brother actually owes the business money, so I don't really know what he thinks is going to happen, I feel no guilt over this situation as I have done nothing wrong, I would just like it sorted out

In that case you and your parents have the moral and financial high ground. I suggest the 3 of you need to decide how to approach your brother as at the moment the 3 of you are supporting his lifestyle which is beyond the businesses ability to provide.

No you should not be feeling guilty about the situation at all, but it will be stress that you don't need or deserve.

 

[D14]

Just a bit of an update as not been on in a long time, after a big fall out last week my brother has now decided to quit because "he has had enough" citing that all he wants is stuff signed over to him so he can run the business in the way he wants, I think sidelining me but I have no proof of that ! Where do me and the two other partners stand regarding this situation, he is only a partner in the business and I don't think he would be entitled to a pay out or if he is it wouldn't be very much ! Any advice on this difficult situation would be good !

This is very simple in that you nor your brother own any assets so have no draw on any of the assets. If you are both full partners in the business and not a salaried partners then you both can have a draw on what the business owns which might be equipment if its financed via the business and any growing crops or crops in store. If you are salaried partners then you are neither liable for any debt nor entitled to any of the profits over and above your salary.

Your brother cannot make any assumptions or demands regarding the assets. Your parents even though they are effectively retired need to sort this out because its them that own it. Sounds like a split down the middle of 50:50 is in order or one of you buys the other out.

 

[D.S.S18]

we have a family member arguing he owns half a tractor, bought new in the early 80's, after 20 years away from the farm, showing no interest, occasionally feeding up (possibly twice in 20 years) , he is now wanting his half back, very low value on the books, gave him half its value, then a bill for the repairs and other bits over the last 5 years .... the repairs outstripped the 'accountants value', soon went quiet.

when we looked back through the accounts their was nothing written down the business having a small loan either. trying to pull a fat one due to a change in family leadership, he was never a partner in business either.

 

[onefineday]

Following this thread, have any of you experience of family mediation if so, what are the implications of it? We are going through something similar, and since the meeting we can't even agree on the minutes?!? What weight would they hold, how important are they?

 

[Renaultman]

Following this thread, have any of you experience of family mediation if so, what are the implications of it? We are going through something similar, and since the meeting we can't even agree on the minutes?!? What weight would they hold, how important are they?

your inbox is full

 

[RushesToo]

Following this thread, have any of you experience of family mediation if so, what are the implications of it? We are going through something similar, and since the meeting we can't even agree on the minutes?!? What weight would they hold, how important are they?

Get the mediator to read back the minutes and ensure that everyone understands the meaning of what has been said. Minutes taken by an independent have weight.