The Bookkeepers.Network (BKN)

Post Info TOPIC: Potential new client - Partnership queries


Senior Member

Status: Offline
Posts: 302
Date:
Potential new client - Partnership queries


I have been having a chat with a potential new client and am a little confused with some of the accounts information they have from their current accountant and would appreciate your thoughts as it has been a few years since I have had a partnership client.

Basically it is a Café, the partners are a couple. When they took over the premises one of the partner's mothers gave them a loan for £25k, this was used as part deposit on the premises and the rest was used for renovations and equipment. They have been repaying the loan to the mother at £500 per month from the business account. In the first year accounts the repairs and renewals are shown as expense paid but there is no sign of the loan or the repayments made from the bank. I am not sure if it may have been treated as capital introduced that they cant claim the loan repayments? It is very confusing.

Secondly shouldn't they provide a balance sheet as well as P&L to reflect the assets/depreciation, capital etc? I understand that it is not Ltd but the client is completely baffled and they say they just get ignored or charged for a meeting if they want to discuss anything.

The client says that the accountancy fees on the accounts are about half of what they have been paying but until I can look through the invoices and bank statements I can't do anything about this. My main concern out of all of this is that the partnership has not been claiming the correct amount of overheads/expenses.

Is the net profit split accordingly the figure used for the partners income on their self assessments?

I know I have waffled but needed to get it typed out for my own sake if nothing else

Any thoughts appreciated.

Sam



__________________


Master Book-keeper

Status: Offline
Posts: 6659
Date:

Have you done professional clearance?


__________________

Joanne  McCormick

Fallows  Hall  Ltd

Winner - Bookkeeper of the Year 2015, 2016 and 2017

Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.



Senior Member

Status: Offline
Posts: 302
Date:

Hi Jo in the process and they have been informed by client

__________________


Master Book-keeper

Status: Offline
Posts: 6659
Date:

Hi Sam
So these questions should be included in the professional clearance letter you send (ie a list of everything that you need)

But before you do that I would be tempted to ask the client for a copy of their partnership agreement document and a copy of the loan agreement.

Yes there should be a balance sheet (always!), plus the usual asset register, cap allowance cals, capital account cals etc etc etc.

Without them its a guessing game so you may need to be prepared to say you are not prepared to do the work.

__________________

Joanne  McCormick

Fallows  Hall  Ltd

Winner - Bookkeeper of the Year 2015, 2016 and 2017

Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.



Senior Member

Status: Offline
Posts: 302
Date:

Thanks Jo, I have a meeting with the clients later on and just wanted to get things straight in my head.

If there is no loan agreement will this make a difference? I am assuming it will. Shouldnt they have been advised at the start to draw one up?

Sam

__________________


Master Book-keeper

Status: Offline
Posts: 6659
Date:

As per usual - clients wander into arrangements with no planning and dont use their Accountants BEFORE the event and then wonder why it all eventually goes bottom end up and why they are in a mess! Usually when they fall out or get divorced or some such and are then completely incapable of making a reasoned decision to save their lives!

No loan agreement = personal loan as it cannot be proved to be a business loan. Unless perhaps the funds went straight in and can be shown to be from one of the parents? Think how can you argue as case with HMRC. But what about the commericality of it - ie what interest rate is being paid (and is interest deducted at source on the payments or is the parent including on their tax return - just pondering out loud!). Of course if it needs to be shown as then injecting capital then the repayments should go to them and they should pay the parent.

What are they saying is the partnership split if they havent got a partnership agreement? If its other than 50/50 - again how can that be proved?

Horse and bolted but they need to get one sorted now.

But then I wouldnt give any advice until you have the clearance and the engagement letter - just do a fact find.



__________________

Joanne  McCormick

Fallows  Hall  Ltd

Winner - Bookkeeper of the Year 2015, 2016 and 2017

Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.



Senior Member

Status: Offline
Posts: 302
Date:

Thank you as always. Will do a list of questions now, unfortunately the ladies father was originally going to be advising as he was an accountant but he passed away suddenly and they panicked I suppose.

Verbally they have said 50/50 but I haven't seen an agreement.

Wish me luck!

__________________


Master Book-keeper

Status: Offline
Posts: 6659
Date:

Good luck - let us know how you get on!



__________________

Joanne  McCormick

Fallows  Hall  Ltd

Winner - Bookkeeper of the Year 2015, 2016 and 2017

Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.



Senior Member

Status: Offline
Posts: 428
Date:

 

Hi Sam

Sounds like it is going to be an interesting meeting, there seems to be a lot of missing info that you are going to need

 



__________________

Doug

These are only my opinions of how I see things and therefore should not be taken as advice



Senior Member

Status: Offline
Posts: 302
Date:

Meeting was postponed but we have been emailing.

No agreement was drawn up for the loan but it is clearly shown going into her mothers account every month, I don't suppose there is anything that can be done retrospectively.

Also no partnership agreement in place so I will be advising this course of action.



__________________
Page 1 of 1  sorted by
 
Quick Reply

Please log in to post quick replies.

Tweet this page Post to Digg Post to Del.icio.us
Members Login
Username 
 
Password 
    Remember Me  

©2018 The Bookkeepers Network (BKN). All Rights Reserved. The Bookkeepers Network (BKN) is a trading division of Bookcert Ltd. Registered in England Company Number 05782923. 2 Laurel House, 1 Station Rd, Worle, Weston-super-Mare, North Somerset, BS22 6AR, United Kingdom. The Bookkeepers Network and BKN are trademarks of Bookcert Ltd. This forum is a discussion forum only. There will usually be more than one opinion to any question and any posting should not be viewed as a definitive solution. No responsibility for loss occasioned to any person acting or refraining from action as a result of any posting on this site is accepted by the contributors or The Bookkeepers Network. In all cases, appropriate professional advice should be sought before making a decision. We reserve the right to remove any postings which are offensive, libellous, self-promoting or engaged in covert marketing. We will not notify users of removals. The views expressed in the forum posts are those of the individual and do not necessary reflect or agree with those of The Bookkeepers Network. Any offensive or unsuitable posts will be removed by the moderators. Any reader of this forum can request for a post to be looked into by sending an email to: info@bookkeepers.network or info@bookcert.co.uk.