Business buy out advice

[Yorkshireman]

I would get some professional & impartial advice. Then, when you have a range of options decide, because 50% for nothing is alot, however she is due her fair share

 

yep what he said ,

[Andy Collins]

IMO, and it's only that, the partnership was with your brother and died with him, no one else. His wife is an accountant, I'd say capable of earning far more than you. As others say, proper legal advice is the only correct route. I like the idea of his daughter having a trust fund set up. Tough one to call though, IIRC he has not been long gone, emotions can be very raw at this time, so not the best time to try and resolve it.

I really feel for you, and all his family, so sad a loss.

[Spruce Pirate]

What a horrible situation to find yourself in, feel very sorry for you.

 

Was your sister-in-law involved in the business before? You say she's an accountant, did she do the books? If this is the situation do you really want or need to cut her out of the business completely, or could she carry on doing accounts and admin work. I think 50% is a bit much for doing this, unless your business grows well beyond being just yourself, but some sort of agreement could be reached - either a wage or a smaller percentage of profit.

 

I have to agree that impartial advice from a proffessional would be best.

[JonnyVine]

Hi Jose

Its a shame that so soon after such a tragedy issues like this emerge.

 

It is cleat that what your sister in law is asking for is unjustified, yes, we all have to live but we also have to be realistic, nothing comes for nothing.

 

To preserve future relationships between everyone concerned, make an inventory of the whole joint assets (ie, saws, grinder, chipper, vehicles etc) between you and your late Bro and get it valued, then either offer her half the value, or half the kit?

 

Make a clean break now just as you would have done if your Bro had still been arround and wanted a split.

 

Whatever happens I hope everthing works out in the best possible way.

 

Best wishes

Jonny

[jose]

thank you all for the advice.

My brother didnt have life insurance. He was a bit fly by the seat of his pants kind of guy i guess, lifes knocks never held him back or down. I guess he proberly felt like this kind of thing just wouldnt happen to him!

 

His wife use to help a bit with the accounts, but not in a big way. My brother use to do all the date input, invoicing etc himself and his wife would help him to have it correctly files in excel spread sheets. This was then sent to a independent accountant.

 

My feelings are very much to try and buy her out of her share so to try and keep things clear and fair. i would hate for money to become a source of conflict between us.

 

The company is only small, it was just the 2 of us with a subbie in occasionally work depending.

We were trading as a partnership but tbh having a partnership will ( for want of a better word) never crossed our minds!

In terms of contracts there are none. We get some repeat customers but they still get other quotes and go with the best prices most times.

So i dont know how much value the name could command? We have always sold our bussiness so to speak through us, our personalities. The face to face time when quoting. The Name and equpiment really only requires money to achive which anybody could do i guess.

 

It was only 3wks on sunday that he died, his funeral was on tuesday the 7th so yes we are all feeling emotional.

But also i need to sort this out because as i understand it everything we have earned up till now if half his wifes, but if i carry on working and paying into this account then she will be entiteld to 50% of everything i am earning without my brothers help/input.

As many have said i want to do fair by her but it cannot be at my families expense. She is still earning her own salary and will also get my brothers share of the money earned and also all equity of his property.

[felixthelogchopper]

Firstly, my sympathies on your loss. Secondly, I don't envy you this dilemma. You are going to need the wisdom of Solomon and incredible diplomacy but you will manage. To me, the only fair way to do it is to dissolve the company with an independent valuation to ascertain the value of the business assets, be they plant or 'goodwill' ie reputation or pre-existing booked work. Without an independent valuation, one or both of you is bound to feel hard done by. At least if neither of you has a say in the valuation, neither can accuse the other of unfairness. Unfortunately, I suspect that neither of you will be entirely satisfied with the outcome either. Finally, I think Andy's idea of a trust fund for your niece is an excellent idea as long as you can afford it.

[WorcsWuss]

I'll caveat this by saying that I'm no expert, but if not a limited company, the only thing which will pass to your sister in law are your brother's assets or his share of any owned between you. This will be at book value and you should be able to get these valued.

 

Any earned money can only be claimed by those who earned it.

As far as I can make out you and your brother were two self employed people who shared a business account and invoicing. At best then this entitles your sister in law to your brother's last month's pay packet, half the book value of any shared assets and *probably* half the cash in your shared business bank account. Freeze the account now and start using one of your own.

This precludes then any future claim for wages.

 

That would be what your brother would have taken with him if he had left the business and all you could take if you had previously walked away, or even walked away now.

By extension then it seems logical that this is not only the right thing for your sister in law to receive but it's also what she is entitled to, your brother's estate.

 

Anything beyond this, end of year profits for instance, I can't see how that applies here. As has already been stated, the partnership has been dissolved.

If you make a loss will your sister in law shoulder half of it? I'd guess not....?

 

As the business was not a limited company it was not an entity in it's own right, therefore I think it's difficult to value it. The arrangement has no real value.

The only value is in physical assets which your brother had legal title to, any monies owed at the time of his passing and half of any profit in the bank or owed at that time.

 

The difficulty will be making sure that in doing right by both yourself and your sister in law, neither of you end up being seen as the bad guy within your families or causing a rift.

As an accountant she will now what she is really entitled to better than anyone.

I don't know her and I hope for the sake of everyone involved that she doesn't try to take advantage of you.

 

Good luck with everything.

[WelshMan]

As others have said, this is an informal partnership without a written partnership agreement. It's probably best not to confuse the issue by referring to it as a "company", because quite clearly it isn't one.

 

The provisions of the Partnership Act 1890 apply. The partnership was dissolved on the death of your brother - section 33.

 

Unless you agree otherwise with your sister-in-law the dissolution provisions in the 1890 Act apply.

[Peasgood]

Banks can, and do, freeze partnership accounts upon the death of one of the partners, they then insist you open a new and separate account. Reason being that unless you have a written partnership agreement stating otherwise the partnership is now dissolved. (as per section 33 of the partnership act as Welshman says)

 

Presumably your sister in law can't access that money anyway. Inform the bank but make sure you withdraw any money for immediate use, if they do freeze the account you may find yourselves strapped for cash.

 

As said, your s-i-l should know full well what she is/isn't entitled to but she will be pretty distraught at the moment (as I am sure you are too).

Can I also add that the fact he had no life insurance is not your responsibility. That was his business not yours, your s-i-l was just as able to make that arrangement too. Don't let feelings of guilt on that matter cloud your judgement.

I expect that sounds harsh but as I said, I have gone through the very same thing not many months ago. There was no life insurance there either, he too had a wife and young kids, his wife too was in a professional job and just as able to make arrangements for life insurance but didn't.

 

My thoughts really are very much with you and yours. It's a struggle but crass as it sounds, time really is a good healer. Take care.

[skyhuck]

This is a truly tragic for all concerned, you all have my deepest sympathy.

 

I've given this a little thought since you first posted this thread.

 

I have come to the concussion that there is only one course of action that could not lead to any future strife.

 

If I were you I would freeze the "Business", "Company", "Partnership", I'm not sure that what you and your bother had conforms to any of these, but you SIL does, so to avoid upset I'd just accept her definition. I would then suggest you sell the whole thing, "as is", "lock,stock and barrel" and then split the proceeds. In this way you are putting yourself and your SIL very much "in the same boat" so to speak.

 

This way there is no scope, now or in the future, for you SIL to feel short changed.

 

Your business was YOU and your BOTHER, it was you two who bought in the work and you two who did the work and thus generated the income, unfortunately your bother revenue generating ability died with him. It appears your SIL thinks the business generates its own revenue, to which she is entitled, unfortunately small tree firms don't really work like that, sure being established make finding the work a little easier, but the work still has to be done in order to turn any enquiry into profit.

 

Trying to convince your SIL that the business has very little value and that it does not throw off any passive income could be very difficult. The easiest way to find any items true value is to sell it.

 

Obviously I don't know your circumstances and you may not be able to do as I suggest, but IMHO it would be the best long term solution. At least this way you and her are both in the same position, there is no scope for any future claim on yourself.

 

Could you just sub out for now and then start up again in the future?

 

Business with family is notoriously difficult, the relationship with you bother must have been very special and must make your loss all the worse, I really hope you can resolve this situation in the least painful manor for all concerned.

Edited May 14, 2013 by skyhuck