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LL Partner ( 50 / 50 ) has decided to shut down the business on his own . We don't have an operating agreement .

San Francisco, CA |

This is an odd one . . . a friend of mine wanted to open up an INTERNET business , but wanted to remain a " silent partner " . He wanted to partner with me so he could use my name . He did not want his employer at the time to know he was opening up his own business ( for numerous reasons ) . During this time my partner started using my email to correspond with vendors , customers etc . and pretended to be me . Out of the blue he decides that I should only get 10s , but still wants to be me . I said NO because that was not our agreement . After I said NO I started noticing revenues dip . I also noticed he opened up his own company doing the same thing we were doing . Now he tells me he is shutting down our business . Can he shut it down / sabotage revenues without my consent ?

I have tried to work things out with him, but ever since I said no to his new proposed revshare....he doesn't respond to my emails. Obviously he doesn't care how the business ends since no one knows it is his business. It is only my reputation that will be affected.

Attorney Answers 5

Posted

I don't think this a question for lawyers to answer in a public forum. Your description shows that you could well have participated in a fraud. You need to discuss your options in private with an attorney of your choosing.

www.bayoaklaw.com. 510-208-5500. This answer does not create an attorney-client relationship. It is not legal advice, because it is only of a general nature. Please contact a lawyer qualified in your jurisdiction to discuss your situation in confidence, using your factual details. Avvo answers are only general legal responses. Item 9 of Avvo.com's Terms and Conditions are incorporated in this disclaimer as though it were printed here.

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Posted

If the business is owned 50/50, and there is no resolution process for the deadlock, then the company could be shut down by a partner with a petition to a court for the dissolution of the company. You're facing an issue there because neither party can force the other do anything on behalf of the company.

If your partner is competing with the business with a new venture and no operating agreement permits such activity, you can file suit on behalf of the LLC to enjoin such behavior as it constitutes the usurping of the company's opportunity, and the partner has the duty of a fiduciary and loyalty to the company to bring these opportunities to the LLC. If the partner created the deadlock for purposes of creating a new business and cutting you out, you have a good claim against your partner, and your money damages would be based upon the profitability of the LLC inclusive of the side-business endeavors. Seek an attorney in this regard.

Seemingly, you have good bargaining position to convince your partner to change his ways as the publication of his participation in a business outside of his employment could be in violation of his employer's policies, and subject him to termination, and there is a possibility that his employer would find out about such public dispute. Such a dispute could be in fact jeopardize his employment.

I'm not sure what you've meant with the statement that you should get 10s, but you certainly have options to stop your partner's side business and maintain the operations of the LLC, although none of these options seemingly give you the definitive right to ensure the long-life success of the business (other than to stop the outside competition); you didn't contemplate disagreements and devise a plan to resolve them with an operating agreement. You need to devise the upper hand in your circumstances and exact what you want through leverage.

Be creative, good luck.

For legal advice and representation, consult an attorney. This response was provided for informational and marketing purposes only, and should not be relied upon as legal advice. No communication with the author of this comment through this website can establish an attorney-client relationship, as the attorney-client relationship can only be established by the mutual understanding of its creation by both the client and the attorney, each party intending to create such a relationship.

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Posted

When you decided to participate in a business designed to deceive others, this is a predicable result. It is highly doubtful you put anything into the capital of the company and even less that that the membership interests were correctly issued. It is hard to imagine what you "legal" damages are. Letting someone use your identity to deceive others is a recipe for disaster.

The above is general legal and business analysis. It is not "legal advice" but analysis, and different lawyers may analyse this matter differently, especially if there are additional facts not reflected in the question. I am not your attorney until retained by a written retainer agreement signed by both of us. I am only licensed in California. See also avvo.com terms and conditions item 9, incorporated as if it was reprinted here.

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Posted

I agree it was a stupid idea and I should have never gotten involved. The secret partner arrangement was only supposed to last for a few months, then this person was going to be a real partner with me. I was the sales, marketing and accounting 1/2 of the equation and he was the technical expert. However he decided to use my name to obtain new clients too (via email). At first I thought it was fine.... we could prospect 2x as hard... Looking back at it I should have never allowed this. When I asked him when he was going to "come out" he kept stalling. Then out of the blue he wanted to adjust percentages. Bottom line.... I don't think he ever really wanted to partner with anyone. He would have tried to do this business himself, but was too afraid to leave his job until he had proof money would roll in. Now that money is rolling in and the clients have been secured.... He has decided to move everything over to his own llc that he started two months ago. Please note this business isn't very old... everything happened in less than a year. Yet again this was a dumb idea..... My main priority is to remove myself from this madness and have this person stop using my name for his personal gain. I also would like to explore keeping the business, but won't have much left to keep if he isn't removed ASAP.

Posted

You have uphill battle. Failure to comply with legal formalities always result in such battle. I agree with all attorneys. If you are committed to follow Mr. Alexander's advise, make sure to hire a damn good attorney who is experienced in such matters and solely practices such area of law.

You must contact a local divorce attorney or obtain telephonic consultation from a divorce attorney to discuss specifics of your situation and get full advise. The information given here is general in nature and does not establish attorney-client relationship.

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Posted

I see nothing in your fact pattern that would lead me to conclude you have established a formal business entity of any kind. That said, as a former deputy district attorney, I would see both a civil and criminal lawyer for your own protection.

Please be advised that this communication is for general public informational use only and does not establish an attorney-client relationship.

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