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Q: buying out a partner ( No Answer,   3 Comments )
Question  
Subject: buying out a partner
Category: Business and Money > Accounting
Asked by: becksg-ga
List Price: $25.00
Posted: 02 Sep 2005 08:41 PDT
Expires: 02 Oct 2005 08:41 PDT
Question ID: 563519
im buying my partner out (his 50%) at this point there is a loan from
him personally to the company which if i didnt buy him out,we are
responsible to pay it back on a 50/50 basis. the question is once i
buy him out, is it just to ask him to still be responsible for his 50%
debt? and to deduct this from the purchase price?
thank you
Answer  
There is no answer at this time.

Comments  
Subject: Re: buying out a partner
From: myoarin-ga on 02 Sep 2005 10:25 PDT
 
Hey, if you buy out his share in the partnership/company (? LLC?), you
 still owe him repayment of his loan, 100%.  It wasn't "we are
responsible to pay back ...".  The partnership/company is/was a
separate legal entity and responsible to repay his loan.
Check your partnership or company bylaws and the Uniform Commercial Code.
I hope you asked here before speaking to him.
Subject: Re: buying out a partner
From: becksg-ga on 02 Sep 2005 11:24 PDT
 
i didnt speak to him yet. when we negotiated the buy out there was his
loan and also another bank loan for which he agreed to be responsible
to 50% so my thought was/is- whats the difference between the bank and
him?
Subject: Re: buying out a partner
From: myoarin-ga on 03 Sep 2005 04:33 PDT
 
Concerning the bank's loan, I can only speculate that each of you may
be individually obligated to the bank  - either as fully liable
partners in a partnership; or - in the case of an LLC - because the
bank insisted that you each co-sign for the loan to the company.
IN the case of your partner's loan to the "company", if he accepts
continued responsibility for 50% of the repayment, he is effectively
allowing you to reduce by that amount whatever you will be paying him
for his interest.

It has been a while since I read the  Cal. Uniform Commercial Code
("Uniform" because states have adapted the language of state law to
make their Commercial Codes "uniform").  I know that small
partnerships and LLC sometimes incorrectly account for partner/owner
loans in their books, hence my recommendation that you refer to the
code.

Please note that I am not a lawyer or accountant and that this is not
legal or professional advice, as the Disclaimer below emphasizes.

I hope that someone closer to the subject will comment or answer  -
especially if I have misinterpreted the matter.
Myoarin

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