Loan in Startup
Discussion
Before speaking to a solicitor I just wanted to know if there was even any point in getting advice.
If you were to lend a sum of money, not vast amounts but a substantial amount on the understanding that would be used to go and obtain clients and generate future revenues. Once these revenues were generated (orders placed etc) the idea was to form a business of 50% equity each.
Revenues were then generated from the money, however things have since turned a bit pear shaped, what is the legal position of reclaiming the original money put in and/or 50% of the revenues generated from the money?
Nothing legally binding was written down at the time, but there are pages and pages of emails talking about the business, discussing work done. Also client meetings and meetings with factories etc. But nothing specific relating to money changing hands other than obviously the amount being cleared in the appropiate bank account of the other person.
Any help greatly appreciated before I start to line the pockets of the likes of Herbert Smith etc
If you were to lend a sum of money, not vast amounts but a substantial amount on the understanding that would be used to go and obtain clients and generate future revenues. Once these revenues were generated (orders placed etc) the idea was to form a business of 50% equity each.
Revenues were then generated from the money, however things have since turned a bit pear shaped, what is the legal position of reclaiming the original money put in and/or 50% of the revenues generated from the money?
Nothing legally binding was written down at the time, but there are pages and pages of emails talking about the business, discussing work done. Also client meetings and meetings with factories etc. But nothing specific relating to money changing hands other than obviously the amount being cleared in the appropiate bank account of the other person.
Any help greatly appreciated before I start to line the pockets of the likes of Herbert Smith etc
Eric Mc said:
matt3001 said:
Would there be any issues arising if I could get our debtors to pay me 50% directly? There would be no legal recourse for me having to give the money back?
Is the business set up as a limited company?Some orders have been complete and the factory is ready to send the commision to us. If I got the factory to send 50% to each party would that be ok given that no incorporation of a business has occured?
As far as "the world at large" is concerned, particularly your suppliers, the business has already started. After all, they have agreed to contract with someone or something to provide goods and/or services. Orders have been placed etc.
From what you are saying, it looks to me that the business has indeed started but that you do not seem to be aware under what type of business format the business is actually being run.
What do the suppliers think? Are they dealing with a limited company, an individual or a partnership?
You keep using the expression "we" which indicates that YOU think you are in a trading patrtnership with someone. Is that what the true situation is?
From what you are saying, it looks to me that the business has indeed started but that you do not seem to be aware under what type of business format the business is actually being run.
What do the suppliers think? Are they dealing with a limited company, an individual or a partnership?
You keep using the expression "we" which indicates that YOU think you are in a trading patrtnership with someone. Is that what the true situation is?
Edited by Eric Mc on Thursday 15th October 16:19
Eric Mc said:
As far as "the world at large" is concerned, particularly your suppliers, the business has already started. After all, they have agreed to contract with someone or something to provide goods and/or services. Orders have been placed etc.
From what you are saying, it looks to me that the business has indeed started but that you do not seem to be aware under what type of business format the business is actually being run.
What do the suppliers think? Are they dealing with a limited company, an individual or a partnership?
You keep using the expression "we" which indicates that YOU think you are in a trading patrtnership with someone. Is that what the true situation is?
Yes if you are going by the definition of two persons working together collectively to make a profit, then it would be a trading partnership. However nothing was formally written up.From what you are saying, it looks to me that the business has indeed started but that you do not seem to be aware under what type of business format the business is actually being run.
What do the suppliers think? Are they dealing with a limited company, an individual or a partnership?
You keep using the expression "we" which indicates that YOU think you are in a trading patrtnership with someone. Is that what the true situation is?
Edited by Eric Mc on Thursday 15th October 16:19
That doesn't really matter. Although it is always recommended that trading partnerships should be set up using formal written partnership agreements, it is amazing the number of partnerships which aren't properly constituted in this way.
However, even without a proper written partnership agreement, it is highly likely that what you are involved in is a proper business partnership set-up, and the law surounding partnerships and their debts and obligations will apply to you as well as the other individual (i.e. you are joint and severally liable for ALL the partnership debts).
Have you made any sort of arrangement for the division of trading profits (if they arise) or the division of trading losses?
What type of business banking arrangements have been set up?
Who is in control of these banking arrangements (i.e. how many signatories are there to the business bank account)?
However, even without a proper written partnership agreement, it is highly likely that what you are involved in is a proper business partnership set-up, and the law surounding partnerships and their debts and obligations will apply to you as well as the other individual (i.e. you are joint and severally liable for ALL the partnership debts).
Have you made any sort of arrangement for the division of trading profits (if they arise) or the division of trading losses?
What type of business banking arrangements have been set up?
Who is in control of these banking arrangements (i.e. how many signatories are there to the business bank account)?
Edited by Eric Mc on Thursday 15th October 17:04
Eric Mc said:
That doesn't really matter. Although it is always recommended that trading partnerships should be set up using formal written partnership agreements, it is amazing the number of partnerships which aren't properly constituted in this way.
However, even without a proper written partnership agreement, it is highly likely that what you are involved in is a proper business partnership set-up, and the law surounding partnerships and their debts and obligations will apply to you as well as the other individual (i.e. you are joint and severally liable for ALL the partnership debts).
Have you made any sort of arrangement for the division of trading profits (if they arise) or the division of trading losses?
What type of business banking arrangements have been set up?
Who is in control of these banking arrangements (i.e. how many signatories are there to the business bank account)?
Well that's the thing, we have done work, agreed that we will get agents' commision from the factory (which we will split after expenses 50:50). We are due to recieve our first set of commision very soon but no business bank accounts have been setup as yet. An amount was given to the other party to pay for things such as travel, fuel, stationary etc and kept in the other parties bank account. However, even without a proper written partnership agreement, it is highly likely that what you are involved in is a proper business partnership set-up, and the law surounding partnerships and their debts and obligations will apply to you as well as the other individual (i.e. you are joint and severally liable for ALL the partnership debts).
Have you made any sort of arrangement for the division of trading profits (if they arise) or the division of trading losses?
What type of business banking arrangements have been set up?
Who is in control of these banking arrangements (i.e. how many signatories are there to the business bank account)?
Edited by Eric Mc on Thursday 15th October 17:04
So to break it off now and to try and get my 50% of the commision due to us, if I spoke to the factory and asked them to make 2 payments, one to myself for 50% and one to the other party for 50%, would there be any legal repocussions or am I entitled to do that?
I would say that all you are entitled to is half the business profits. That is the normal in a 50/50 partnership.
Unless, of coutrse, you had set out at the very beginning very specifically that you wanted all of the "loan" you had made to the partnership returned to you.
If the partnership has no funds left, then it cannot pay you - end of story.
Unless, of coutrse, you had set out at the very beginning very specifically that you wanted all of the "loan" you had made to the partnership returned to you.
If the partnership has no funds left, then it cannot pay you - end of story.
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