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  1. #1
    Join Date
    Jun 2009
    Posts
    2

    Question Problems With a Business Partner

    LLC registered in NV. Company operates in MS.

    I began selling "widgets" online last year as a one man shop working from home. It grew quickly. I called "Bill", an old acquaintance, and offerred him a job as a customer service rep. He fell in love with the business and said that he and his friend "Sue" were interested in becoming partners. The three of us met and formed a new LLC.

    Sue contributed $50,000 in seed money. I contributed the currently operating websites, client database, and the only widget knowledge. Bill was to contribute legal services and $25,000 worth of sweat equity. I own 50%, the other two each 25%.

    Unanimously agreed and resolved that Bill and I run day to day ops. Payroll company put in place. I began working. No work from Bill led to me removing him from the payroll. He then voluntarily gave up his shares, which were distributed to Sue and I, two to one.

    Company moves on with me as the only employee. Sue stops taking my calls, tells me that she doesn't want to know any details of the business. Come to find out Sue, who is 56, wanted a relationship with the younger Bill. Now that she will not be seeing Bill, Sue wants her money back. Operating Agreement nor the Buy/Sell Agreement gives her the right to demand a buyout. In fact, it states that I specifically have the right to force her to sell me her shares, but at my sole discretion.

    Company and brand is still going strong. Sue decides to empty the bank account of more than $8,000. Checks pending, I threaten owner embezzlement charges. She returns the money.

    I get contacted from a really grouchy attorney who says that I stole Sue's money and she has nothing to show for it. I furnish him with all the info, records, etc. Grouchy rolls his eyes and tells Sue that nothing has been done wrong.

    Next month same scenario with a different attorney. And again the next month. Each month a new law firm accusing me of everything from flat theft to "grooming" an older woman. She has gone to her local newspaper and tv news team to tell them that our Widget Company has "scammed" her.

    Operating Agreement and Buy/Sell bar Sue from suing. Mandatory arbitration is called for to settle disputes.

    She has made it impossible for me to continue to run this company. I have put on hold or canceled major distribution deals in fear of what she will do next. I was advised to call a meeting and vote to dissolve the company. As major shareholder I can vote to do so whether she agrees or not. Her latest lawyer says he will sue if I do so because after the dissolution of the company, mandatory arbitration no longer is in effect and he will file suit against me personally.

    So, it seems that I can't run the business and I can't dissolve the business. I have no idea where to go from here. Any advice, no matter how short, would be appreciated. I can't find anybody that will touch this for less than a $10k retainer, which is out of the question for the company and myself personally.

  2. #2
    Join Date
    Mar 2009
    Location
    Key West, FL
    Posts
    2,350

    Default Re: Desperate for Help - Partner Problem

    All of her lawyer shopping obviously shows she has no case.

    If you can't buy her out or otherwise play nice, turn the tables on her.

    If she is so worried about her investment, why is she trying to destroy it and you and thus any chance of getting it back?

    She has obviously slandered and libeled you and the company. I would turn the tables and tell her in a certified letter that she is libel for damages far in excess of her investment and to either shut up or being sued.

    Not alot to be done about the LLC at this point without money. So approach it from another direction such as the above.

    LLC's are popular but they are just partnerships with the individuals protected against personal liability from third parties. I hate them and would never enter into one.

    I certainly would NOT allow any junior partner to have or be a signatory on a checking account, and thus would never enter into a LLC.

    I would personally create a corporation to hold my part of the LLC and then do everything in the name of the corporation (which could be the same name as the LLC but with INC. or CORP.) and create a new bank account without the junior partner being a signatory and then do all the money, property ownership, etc. through that.

    That way the LLC is pretty much in hibernation and her power is reduced to nothing.

  3. #3
    Join Date
    Jun 2009
    Posts
    2

    Default Re: Desperate for Help - Partner Problem

    Thank you for the response. Most recently I was given the advice to call the annual meeting and vote to dissolve the LLC. My majority vote would prevail and the problem would be solved. The same council told me that I should be seriously considering suing her for defamation, business interference, and a number of others. I guess it's time to use teh rest of the company money to get an attorney.

  4. #4
    Join Date
    Jul 2007
    Location
    Florida
    Posts
    2,344

    Default Re: Problems With a Business Partner

    If you dissolve the business you will have to distribute assets in accordance with the ownership interests. Get an attorney to help you with this.

  5. #5
    Join Date
    Mar 2009
    Location
    Key West, FL
    Posts
    2,350

    Default Re: Problems With a Business Partner

    If it is a meaningful business, dissolving it reduces it to assets that have some cash value and that has to be distributed to the members of the LLC as said above.

    The thing is if the intangibles have value, you are sort of throwing them away. Things like customer goodwill, customer lists, marketing materials, etc. If these things are not important or have no real value to the business, then sure, throw them away.

    If you want to continue the business as a corporation owned by you, then set up a corp first and sell these things to the corp at some token amount.

    If you just take them and use them in a new business you could open yourself up to a civil action from your former partner.

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