I started a t shirt business with a friend about 9 months ago in California. I registered the business as a sole proprietorship under my name but we ran it as equal partners where we both put 50% of the money needed to start. However, over time my partner had to put more money into the business since I couldn't keep up with necessary funds. My partner and I no longer get along and have conflicting ideas about where the business should go and how we should allocate funds for marketing etc. For this reason I would like to part ways with him. Since there was never any written legal agreement between us and the business was registered under my name with all merchant accounts and bank accounts in my name as well what can I do about this situation and can I legally kick him out of this business if I offer to buy him out at a fair valuation of the business? What worries me though is that since he had more experience building websites he registered the websites domain name but thats basically the only thing that is under his name. Thanks and I really appreciate your time.
State/Country relating to question: California
I have asked my partner if he would agree to sell out and he said he isn't interested so I would like to know what options I have since I definitely don't see this working out long term if we stay partners.
Thank you for the post, I am happy to assist you by answering your questions. Because you technically own the business, and never executed any agreement to give your former friend an interest in the business, you can make your friend an offer for a buyout with the caveat that the offer is to compensate the friend for the investment in the business, but not to affirm that the friend had an ownership interest in the business, and at all times acted as an investor, not an owner.Your position would be that there is no need to kick the friend out of the business because technically the friend was never in the business (formally). Please let me know if you have any follow up questions.
Drafted Negotiated and/or Reviewed Thousands of Commercial Agreements
Thanks for the answer. I find your reply very helpful and will take action very soon but I am afraid that he will make things difficult if he brings in emails that show discussions between us both of splitting costs 50/50 that he can argue make him a 50% owner. Also since he registered the website does he have any power over me or am i fine since that is the domain that is tied to the business that is registered in my name and I can legally take it over? Can all this be handled without the use of lawyers?
All of this can be handled without attorneys, though unlikely as your friend does not want to amicably resolve this. If the emails show the mutual understanding that he acquired a 50% interest in the business, then you would ultimately be bound by this, and if you and your partner cannot agree on a purchase of his shares, you all should consider submitting the dispute to binding arbitration, this would relieve you both of the legal fees and would be a method to resolve this dispute without being forced to dissolve the business.
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