If you are a partner in a partnership business in the Sheffield City Region that is struggling with debt and unpaid bills, you should consider the various options for dealing with an insolvent partnership – including winding up the partnership.
If the partnership is a ‘traditional’ partnership, in other words it is not a ‘limited liability partnership’ or LLP, the partners are all jointly and severally liable for the debts and liabilities of the partnership.
But what does that actually mean?
The individual partners are responsible for repaying any creditors who are owed money buy the partnership. The term ‘joint and several’ means that whilst they are all jointly liable for the debts, creditors can pursue whichever partner they feel is most likely to pay the debts.
So if a partnership has four partners, creditors could just chase one of the partners for the money if they believe that partner has the means to pay them. The creditors do not have to chase each individual partner for one quarter of the partnership debts. If one partner pays more than his share of the partnership debts, he may be able to pursue the other partners for the difference, but if the other partners simply cannot afford to pay their share of the debt, it may be impossible to recover the debt. There may be a partnership agreement that provides specific rules about how the partnership is run and, crucially, who is responsible for the debts if a winding up occurs.
Many partnership winding up situations arise every year in Sheffield and it is important to get expert advice from a partnership winding up expert before committing to any particular course of action. Find out all the options so you can make an informed decision about which route is right for you and your Sheffield-based partnership.
A partnership that cannot continue to trade because it is no longer viable may be wound up – in other words, it can be closed down and liquidated if it cannot pay its debts. This is the recommended way of dealing with an insolvent partnership that cannot carry on trading. However, it is important to understand the impact that this will have on the individual partners.
The ‘default’ position in partnership law may have been changed because the partners entered into a partnership agreement, so it is important to understand how the partnership was set up and what agreements were made between the partners.