My investment partner and I intend to start a business through a partnership structure, and hold a 50/50 share each. She also has a number of different businesses outside our partnership. I'm not sure what financial position she is in. What are the risks if any of her other businesses go bankrupt?
Lawyer Answers (1): Answers from lawyers are general preliminary responses. They are not formal legal advice and cannot taken account of all your circumstances. They do not create a lawyer–client relationship.
If your business partner makes some personal financial choices in her other businesses, which results in a bankruptcy, and her non-business assets are not sufficient to meet her debts, there may be problems for your partnership. For example, her creditors may attempt to access her share in your partnership. Alternatively, regardless of any creditor situation, if your other partner becomes bankrupt and you don't have sufficient individual funds to meet the ongoing costs of the business, you may be forced to close and dissolve the partnership. If the cash flow problems lead to the partnership accumulating debt which cannot be paid out of the partnership assets, your personal assets may also be at risk.
Before you enter into a partnership you should make reasonable checks of the financial position of any other partners.