Q. I am thinking of going into partnership with a relative who lost a lot of money in his previous business venture. However, he does have a flair for business, provided that I can keep him on the straight and narrow. If the new business failed, what would be the extent of my liability?
A. In an ordinary (unlimited) partnership every partner is jointly and individually liable for all of the debts and obligations of the partnership. A third party who has suffered loss or damage can therefore sue one or more or all of the partners separately or jointly and each partner is personally liable to the extent of their "last shilling and acre". You are therefore vulnerable to losing your personal assets (including your home) if there is a significant claim against the partnership. Given your relative's past history, you need to think carefully before proceeding. If you do proceed, you may want to consider setting up a company or a Limited Liability Partnership (LLP) in order to protect your personal assets.
Q. What is an LLP and how would this help?
A. An LLP is a separate legal entity, much like a company, and it is the LLP itself which would be liable for any losses or damages as opposed to the individuals involved (who are called members). Generally speaking, a member's personal assets (i.e. those assets owned by you, not the LLP) would therefore be safe.
Choosing the best format for a new business needs to be carefully considered. For specialist advice contact Keith Swan of Patterson, Glenton & Stracey Solicitors by email at ks@pgslaw.co.uk or by telephone on 0808 231 7043. Patterson, Glenton & Stracey Solicitors have provided legal advice to the people of South Tyneside for over 125 years. For details of their full range of services and to view previous Gazette articles please log on to www.pgslaw.co.uk . Guided by Logic.
