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Category: Business Law
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Experience:  30+ yrs. representing small business, real estate, probate
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Situation: Two business partners agree verbally into a 50/50

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Situation: Two business partners agree verbally into a 50/50 partnership. The agreement Client revenue - expenses is split 50/50. Partner B has an established business structure an LLC and business checking account that is agreed to be used in the interim of the formal 50/50 corp being formed. It is found later that Partner B used $14,000 of the client revenue - expenses for his personal use while he was in the care of his business account. What recourse and action should Partner A take in order hold Partner B accountable. Seems like Fraud.
Submitted: 1 year ago.
Category: Business Law
Expert:  Irwin Law replied 1 year ago.
It is not fraud, which I won't define now. What Partner A has is a claim for breach of contract against B. That is, unless the partnership distributes $14k to partner A. As it stands, B might have had the technical legal right to draw down $14k, but now the business owes partner A a full $14, to equalize it. If B pays A from his personal funds then he owes A $7k. If the business is not capable of paying A what he is owed, then he can sue B for breach of contract and recover a judgment for what he is owed. I hope this Answer is helpful and that you will give it a positive rating. If you have any follow up questions please send back a Reply. You should consult a local attorney to verify that this information is accurate for your state. Thank you for using Pearl.com- Just Answer. We appreciate your business.
Customer: replied 1 year ago.

Same two partners...Partner A & B verbally formed a partnership which partner B is denying...essentially hiding behind the cover of an LLC that partner B was formed/owned 100%. Both A & B verbally agreed to use B's LLC to conduct immediate business in the interim of forming a formal Corp with each being 50/50 shareholders. There are all sorts of supporting documentation ie.,emails, client relationships, employees etc that support this verbal agreement of a partnership but no specific document in writing neatly signed and dated. What types of documentation will substantiate evidence of the formation of the initial partnership?

Expert:  Irwin Law replied 1 year ago.

Use anything and everything that points to a verbal agreement by B to treat certain business as partnership assets. You don't say anything about what A contributed to the business, and that is critical. A's mere statement that "we agreed to be partners", without more on A's part like capital contributions or bringing the business, would be a weak case.

I hope this Answer is helpful and that you will give it a positive rating. If you have any follow up questions please send back a Reply. You should consult a local attorney to verify that this information is accurate for your state. Thank you for using Pearl.com- Just Answer. We appreciate your business.

Irwin Law, Attorney
Category: Business Law
Satisfied Customers: 4853
Experience: 30+ yrs. representing small business, real estate, probate
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