Item A: Two Rivers Kayaking
Chloe Barnes and Tom Reece have been business partners since 2021. Their business, Two Rivers Kayaking, runs guided kayak trips and beginner courses on rivers in Shropshire. A half-day trip costs £38 per person and a beginner course costs £120.
The partners own 34 kayaks, which are kept in a rented storage unit costing £400 a month. They also pay £2 400 a year for public liability insurance. In the summer they employ four instructors, who are paid only for the hours they work. Last year the business made a profit of £31 000, which the two partners shared equally.
Chloe and Tom did not sign a deed of partnership when they started. They now disagree about the future of the business. Chloe wants to buy a minibus and trailer, costing £60 000 in total, so that groups can be collected from Shrewsbury and driven to the river. Tom is worried about borrowing so much money, because as partners they have unlimited liability.
A bank has offered Two Rivers Kayaking a £60 000 loan repayable over five years. Alternatively, the partners could convert the business into a private limited company and sell shares to two friends who have offered to invest the £60 000. Between them, the two friends would own 40% of the shares and would expect 40% of the profits each year. Chloe and Tom would own the rest equally.
