Personal liability

If it wasn’t a limited company then both partners are liable, it doesn’t make any difference if they’ve sold the business.

Are you sure it wasn’t a limited company though? You said that one of them was sacked as director and partnerships don’t have directors.
From the Business Link website

Sole Traders/Partnerships
4.1 You are personally liable for all your business debts.
• There is no limit to the extent of your liability. If you cannot pay off your business debts, you can be made bankrupt.
• In a partnership, each partner is liable ‘jointly and severally’ for all the business debts of the partnership. This means that, if the business fails, you could end up having to pay your partners’ share of the debts, as well as your own. But for income tax purposes each partner is only liable for their own share of the profits.
4.2 You personally own the assets of the business.
4.6 You can limit your liability in a partnership by setting up a limited liability partnership.
• This is a corporate body with its own legal identity and capacity.
• It has the organisational flexibility of a partnership.
• It offers limited liability to members.
• It must be registered at Companies House.
• Annual accounts must be prepared and filed. There are other filing requirements, similar to those for the limited company which have time limits for compliance.
• The partnership agreement is confidential to members.
• Withdrawals may be clawed back, if the partnership is declared insolvent within the next two years.
• If you are a member of a trade association, check to see whether it has any conditions which may apply to your registration as an LLP.
• Being a member of an LLP can minimise NI contributions

Posted under Legal Issues

Posted by Alec at 6:57 am, May 27, 2008

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