Architect plans for break-up
TM writes: I am one of three partners in an architect’s practice. The managing partner has told us he intends to leave and, as a result, we are all likely to go our separate ways. We have just over six months to prepare and would like to know the key areas we should be focusing on to ensure there are no problems.
Where there is a business split, it is natural for each party to protect their own position and think about the future. However, there are a number of issues that should be dealt with first, writes Jon Sutcliffe, partner at Kingston Smith LLP. In addition to financial aspects, you should consider what will happen to your office and staff, as well as other assets owned by the practice.
One of the greatest risks is that there is an issue with previous jobs on which the client makes a claim. You should be able to get run-off professional indemnity insurance, but it can be expensive. Should one of the partners retain some of the clients, it may be possible to roll this into his/her ongoing insurance but you will need to get this looked at. If your office is rented, you must look at giving notice on the lease and deal with any lease settlement and dilapidations issues that arise. On HR matters, you are always recommended to take advice.
On the financial side, draw up final accounts and consider how and when any remaining practice funds will be distributed. You should each consider your own personal tax position.
Finally, let everyone dealing with the practice know. This can help you keep in contact and allow any post-split issues to be resolved.