22 April 2016
Hi
My client is in a business partnership with her de facto partner. The partnership purchased a small business utilising vendor finance, obtained a business loan from a bank, entered into a commercial lease, registered the business name and registered for PAYG and GST.
The relationship has now ended and my client wishes to end the business partnership. Her principal concern is that should the business fail in the future she is protected from liability.
What steps should my client take to exit the various arrangements?
Dissolve the partnership. See the precedent in our Companies, Trusts and Partnerships guide.
Ensure the business name does not contain her name and change any registration details to ensure a search shows the business as his alone. Remove any reference to her on stationary. Make changes to ABN details. Advise those who give credit to the business that she is no longer a part of the business and accepts no responsibility for any future debts. Advertise in the local paper if her identity as part of the business is widely known and important, for instance, a celebrity athlete and a sports shop.
The bank will continue to hold her liable for any loans unless a release or refinance is arranged and likewise she will continue to be liable on any guarantees she may have given unless they are released. She will continue to be liable on the lease unless released or a new lease replaces the existing one.
An indemnity from her ex-partner may provide some comfort.
Regards
Mentor
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