You don't indicate if the business is a sole proprietorship or a corporation of some type. It could make a difference, since it appears that she is intent on showing that he is a partner for all intents and purposes. I would think that she has an uphill battle, but I also think that you should meet with an attorney to discuss. That attorney is going to want to know AND DO NOT ANSWER ON THIS PUBLIC MESSAGE BOARD if he also shares in the losses, when there are losses. At a minimum, I would want to get an unequivocal written statement from your employee denouncing any interest in the business to prevent him from having a change in strategy in the future.
If you'd like to discuss, please feel free to call. Jeff Gold Gold, Benes, LLP 1854 Bellmore Ave Bellmore, NY 11710 Telephone -516.512.6333 Email - Jgold@goldbenes.com
I agree with Mr. Gold that you should not disclose further details about your arrangement with your employee in this forum because communications here are not protected by the attorney/client privilege. Even if you have formed a business entity, that entity might be in an partnership with the employee even though there is no written partnership agreement. You should discuss the facts with a local business lawyer and have him or her review relevant documents. Section 152.052 of the Texas Business Organizations Code sets forth the rules for determining if a partnership is created. It provides as follows:
"(a) Factors indicating that persons have created a partnership include the persons':
(1) receipt or right to receive a share of profits of the business;
(2) expression of an intent to be partners in the business;
(3) participation or right to participate in control of the business;
(4) agreement to share or sharing:
(A) losses of the business; or
(B) liability for claims by third parties against the business; and
(5) agreement to contribute or contributing money or property to the business.
(b) One of the following circumstances, by itself, does not indicate that a person is a partner in the business:
(1) the receipt or right to receive a share of profits as payment:
(A) of a debt, including repayment by installments;
(B) of wages or other compensation to an employee or independent contractor;
(C) of rent;
(D) to a former partner, surviving spouse or representative of a deceased or disabled partner, or transferee of a partnership interest;
(E) of interest or other charge on a loan, regardless of whether the amount varies with the profits of the business, including a direct or indirect present or future ownership interest in collateral or rights to income, proceeds, or increase in value derived from collateral; or
(F) of consideration for the sale of a business or other property, including payment by installments;
(2) co-ownership of property, regardless of whether the co-ownership:
(A) is a joint tenancy, tenancy in common, tenancy by the entirety, joint property, community property, or part ownership; or
(B) is combined with sharing of profits from the property;
(3) the right to share or sharing gross returns or revenues, regardless of whether the persons sharing the gross returns or revenues have a common or joint interest in the property from which the returns or revenues are derived; or
(4) ownership of mineral property under a joint operating agreement.
(c) An agreement by the owners of a business to share losses is not necessary to create a partnership." TX BUS ORG § 152.052
The foregoing is merely offered as general guidance. Again, you should discuss the details with a local business lawyer.
Legal disclaimer: John Bonica is licensed to practice law only in Texas. His response is not legal advice and does not create an attorney/client relationship. The response is only intended to provide general information. The question may not include significant and important facts that would change the response. You should confer with a local attorney for competent legal advice.
It would depend on the business entity. You should always have a business attorney representing your business. Always - as this could have easily been avoided. You might attempt, as Mr. Gold mentions, acquire a written statement from him.
If you had an LLC or Corporation, and you did not go through the formalities of making him a member/shareholder - then he will have a difficult time proving that he had an interest in the
Matthew Johnson phone# 206.747.0313 is licensed in the State of Washington and performs bankruptcy, short sale negotiations, and estate planning in Whatcom, Skagit, Snohomish, King and Pierce counties. The response does not constitute specific legal advice, which would require a full inquiry by the attorney into the complete background of the facts and circumstances surrounding this matter; rather, it is intended to be general legal information based on the limited information provided by the inquirer; it This response also does not constitute the establishment of an attorney-client relationship, which can only be established after a conflict of interest evaluation is completed, your case is accepted, and a fee agreement is signed. Johnson Legal Group, PLLC
To succeed in arguing that the arrangement between you and the employee is a partnership, his wife must prove that the intent of the parties was to form a partnership. The court may consider evidence such as a sharing of profits or gross returns, the sharing of liabilities and any agreements to make contributions of money or property to the business, management responsibilities, the amount and type of services rendered by the parties, and the title to any real or personal property used by either of you for the business. You should consult legal counsel before pursuing and other actions.