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Partnership Share.

Partnership Share.

A property partnership (development) has been in existence for 5 years. A junior partner (circa 5%) wishes to leave the partnership. His original capital account of £20000 is now a negative due to accumulated losses (for which tax relief has been claimed). When the development has been completed there may be a profit or a loss depending on market conditions.
The partner wishes to leave the partnership to avoid potential claims against his assets and has asked for a valuation of his share.

As he's in negative equity already (but potential profits(?)) does his share have any value?

Assuming the other partners allow him to leave without making good his capital account, does his leaving have to dissolve the partnership?

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08th Aug 2012 12:03

Value the goodwill

Goodwill probably doesn't exist but the outgoing bloke will say that it does.

I would say that he should pay off his capital account but the others may just be glad to get rid of him.

A lot depends on the attitude of the individuals concerned.

In the absence of a partnership agreement any member can dissolve the partnership.

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By pawncob
08th Aug 2012 18:17

partnership share

The point is that at the moment his capital account is negative due to losses. If the project is profitable he'll be positive (but no longer a partner or entitled to profit share). I suppose if he leaves it draws a line under his liabilities. until a sale is made Profits only exist on paper and cannot be quantified.

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08th Aug 2012 18:57

yes but there appears to be retained profits

in WIP, a market value has to be agreed and the effect of the resulting profit and loss agreed

 

i was interested to note sunshine deserts comment that any any partner can dissolve a partnership. Phil briefly  in this case what would happen

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By pawncob
08th Aug 2012 19:21

BUT (and there always is one)

In todays market the agents' valuations have a spread of £580,000 between top and bottom (fire sale) prices, and this represents a very large part of the profit.

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