Skip to main content

Partnership and shares in startup

Irvine, CA |

Hi,

I have been involved with a startup company for about 2 years now. I have been promised sweat equity/shares for my services. Nothing has been inked on paper but several verbal promises have been made and email exchanges have happened over the course of 2 years that would confirm my involment in the startup. There are also emails that promise that shares and documents would be finalized and formalized but nothing has been done. Now I do trust my partners.. however is there some recourse in case things go awry.

Attorney Answers 3


  1. You may trust them today, but what happens if one of them gets hit by a car or gets into a fight with you. Or if one of them divorces and his wife claims he owns more of the company because your shares are not shown?

    You need to document the agreement and get shares issued.

    In addition, company should be having board and shareholder meetings that you attend and get minutes from. These minutes should also reflect your status.

    Sit down with your partners and get the corporation properly documenting agreements or you and it could have real problems.

    The response given is not intended to create, nor does it create an ongoing duty to respond to questions. The response does not form an attorney-client relationship, nor is it intended to be anything other than the educated opinion of the author. It should not be relied upon as legal advice. The response given is based upon the limited facts provided by the person asking the question. To the extent additional or different facts exist, the response might possibly change. Attorney is licensed to practice law only in the State of California. Responses are based solely on California law unless stated otherwise.


  2. There's no reason not to put this partnership agreement in writing. If you don't, you may have to enforce an roal agreement, supported by emails and proof of performance and lots of "he said, she said" testimony, and your recollections and understandings of things may be very different from those of your partners.

    Moreover, in CA, an oral contract only gives you 2 years from the date of breach to enforce it with a lawsuit, while a written contract not only spells out everything and goes a long way in avoiding potential misunderstandings, but also gives you 4 years fronm the date of breach oto sue if you have to.

    See a business lawyer for help to make sure your company is structured right and you follow all the rules that apply to it and to ensure that you have an enforcebale contract. 2 years pf work is a lot to invest without some legal protection.

    Disclaimer: Please note that this answer does not constitute legal advice, and should not be relied on, since each state has different laws, each situation is fact specific, and it is impossible to evaluate a legal problem without a comprehensive consultation and review of all the facts and documents at issue. This answer does not create an attorney-client relationship.


  3. Aside from the applicable statute of limitation issues of 2 years on an oral contract and 4 years on an written contract, your question does not make it clear what type of entity is involved. You indicate your colleagues are partners indicating a partnership, but you also indicate you have been promised shares indicating a corporate entity. Sounds like you definitely need to reduce things to writing and get a copy of the applicable entity agreements to make sure you take appropriate and enforceable actions. You should contact a business attorney in your vicinity to discuss.

    DISCLAIMER & IRS Circular 230 DISCLOSURE:

    The information in this answer is for general information purposes only. Nothing on this communication should be taken as legal advice for any case or situation. Nothing herein is intended as legal advice. You should not rely upon any information as a source of legal advice, and your receipt or viewing of any such information does not create an attorney-client relationship between you and James E. Pratt.

    IRS Circular 230 Disclosure: To comply with requirements imposed by the IRS, we inform you that any U. S. federal tax advice contained herein (including any attachments), unless specifically stated otherwise, is not intended or written to be used, and cannot be used, for the purposes of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter herein.

Business topics

Top tips from attorneys

What others are asking

Can't find what you're looking for?

Post a free question on our public forum.

Ask a Question

- or -

Search for lawyers by reviews and ratings.

Find a Lawyer

Browse all legal topics