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Richard - Bizlaw
Richard - Bizlaw, Attorney
Category: Business Law
Satisfied Customers: 8899
Experience:  30 years of corporate, litigation and international law
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I started a small coffee shop in October 2009 (as an contractor

Customer Question

I started a small coffee shop in October 2009 (as an contractor on an air force base). I was out of a job for a few months and my wife helped me to get the equipment. I also sold my car to help paying for the expenses. My wife also carry me through by paying some personnel out of her salary.

After a few months I got the opportunity to open another coffee shop combined with a snack bar/take out food.
When I start to prepare the shop - my friend helped me to do the renovations. He also help me to buy some stuff on his credit card. (that was paid back in full to him)
Things were rough with finances, personnel problems, taxes etc. up to a point where I knew I have to quit or get help.

I went into a verbal contract offering my friend 50% of my coffee shop business. On that stage I had 2 shops. I wanted him on board because I worked very long hours and need someone to help me out. He accepted and came on board without paying anything (yes I just gave it to him for his help). He propose that we make turns of coming in early every other week. He also impressed me with his talk about finances and general business management.
The help was not close to what I thought and hope it would be. He almost never came in early and I proceed to work as before.
(Again - All the equipment in the new shop were paid for by my wife and she support a lot of payroll etc (that was before my friend joined.)

1. About 4 months after he joined - we opened another coffee shop. He paid for most of the equipment with his credit card. After about 6 months we saw that its not worth it and decided to close. We found someone that was interested in the shop and we basically sold the equipment for an amount of $6000. The lady paid us monthly. The outstanding on his credit cards were round $2000 and the espresso machine's outstanding balance was about $1000. In the months that followed I gave him 2 of the checks ($1600) and continue to pay the credit card payments out of the business account. He now claims that I owe him more money but I feel that the outstanding $2000 + 1600 he got were enough. Out of the rest of the payments from the buyer I paid my wife 2400 and the rest went back into the business to cover costs.

2. While we still had the above shops I got an invitation from another air force base to open a smoothie bar at the fitness center. The numbers looked good and we went for it.
The business paid for the start up cost and it was paid in full after a few months. This base is about 60 miles from where we live and my friend took it on him to service that shop. In the meantime he got less and less at the other shops.
The business borrow the smoothie bar $4000 in October last year to introduce a new line of smoothies. That never happened and the money were absorbed in the business (we had a separate account and LLC for this shop)
The shop did not make that much money but it was still profitable enough to keep .


3. In February this year I was offered a job at my old company in Chicago and accepted it with my partner's blessing. Before I left for the job we decided to sell the shop with the snack bar.
The buyer couldn't make up his mind and my friend decided that he want to give it a go. The 2 of us were talking without my family knowing about it. While we were negotiating - my family decided without my knowledge that they want to give it a try as well. We discussed it with him - he was not happy but agreed. He also told me not to offer it again to him if we have problems. (he now deny that he said that) Me and my wife decided to GIVE him the two remaining shops and just keep the one (the coffee shop/snack bar). My daughter run it while I was working. Everything appeared to be fine and things went on. In the meantime my friend moved the coffee shop to a different location and decided to renovate the whole place. He sold all equipment in the old shop (which is fine - it is his)
The smoothie bar contract on the other air force base ended and he decided not to bid on it again (which is also fine - it was given to him)

4. The end of June this year my daughter decided that all the stress etc is not for her and one of the workers in the shop said that her mother is interested in it.
I talked to her mother and she offered me $14000 for the equipment.

When my friend heard about it he was furious and told me I should have given him first option to buy. I reminded him that he told me not to offer it again but he deny it.

As a friend (yes I still see him as a friend) I feel bad that I did not talked to him first but with him telling me in February not to offer it to him - I didn't think it would be a problem. My wife also thought that it would put them in the same difficult position that we were all the time and they just had all the expenses with the renovation of his new shop. My friend think we have a personal vendetta against him - and that is not true.
Submitted: 1 year ago.
Category: Business Law
Expert:  MDLaw replied 1 year ago.
Hello and thank you for using the JA website. I look forward to assisting you this evening. To that end, what is your legal question?

Customer: replied 1 year ago.

I want to know if he have any claim on the shop I want to sell now. And also if he can give me a bill for his time he put in during the time he was an partner. Neither of us took a salary during this time because there were not enough money to cover all costs


Thank yu

Expert:  MDLaw replied 1 year ago.
You stated that you gave your friend 50 percent of the business. Were both shops included as part of the business?
Customer: replied 1 year ago.

Yes. It was. In the end we had 3 shops and I gave him 2

Expert:  MDLaw replied 1 year ago.
I'm not going to be able to stay online tonight and so I will opt out so that another expert can help you. My apologies.
Customer: replied 1 year ago.

ok - do I have to do anything or will they pick it up automatically?

Expert:  Richard - Bizlaw replied 1 year ago.

Hello, I will try to help you. Please remember I just report or interpret the law, so the outcome may not be what you hoped for. At this juncture, you do not have to take any action. Once you transferred the 2 shops to your partner and took the third one for yourself, your partnership terminated and there was nothing either of you had to account to the other for. Your position is that you owe him nothing on the sale of your shop and he owes you nothing on the sale of his.

 

If he disagrees, he will have to file suit and prove that there was some ongoing obligation. Given the facts posted in your post, he will not be able to make those proof and a court will not sustain his claim.

 

If I have answered all your questions, please rate my answer excellent as that is how I am compensated. If you have more questions, please let me know. If my answer was particularly helpful you can pay a bonus.

 

Customer: replied 1 year ago.

Thank you so much


Just one more question. What about the fact that he wants to send me a bill now for the "time and effort" he spend at the shop during the partnership. Dont know if I have mentioned it but neither of us took a salary besides some gas money once a week

Expert:  Richard - Bizlaw replied 1 year ago.

Your position is that all issues were resolved when the partnership was terminated and the shops divided. You would have an equal or greater claim for your time. The transfer of the shops settled all claims between you two, that is your position.

 

If I have answered all your questions, please rate my answer excellent as that is how I am compensated. If you have more questions, please let me know. If my answer was particularly helpful you can pay a bonus.

Customer: replied 1 year ago.

Thanks a million - I appreciate it and will sleep so much better tonight!!

Expert:  Richard - Bizlaw replied 1 year ago.
you are welcome. Please do not forget to rate my answer as that is how I am compensated.
Richard - Bizlaw, Attorney
Category: Business Law
Satisfied Customers: 8899
Experience: 30 years of corporate, litigation and international law
Richard - Bizlaw and 3 other Business Law Specialists are ready to help you
Expert:  Richard - Bizlaw replied 1 year ago.
I wanted to check in to see if everything went OK and if you had any more questions.

Bizlaw
Customer: replied 1 year ago.

Hi Bizzlaw,

Thank you for following up. Great service!!

We met and talked about the whole thing last weekend and both decided to give it a rest. He is still pretty upset (but calm). The only thing is that he "warned" me that there would be "consequences" if the new owner took some business from him.

 

I know this is ridiculous but can he sort of claim "lost of income" or anything similar? Doesnt make sense to me but with the law you never know what might jump out.

 

 

The final sale of the shop is not through yet - hope to hand over by the end of the week after all the approvals etc. I am sooo tired and frustrated with the whole thing. Lesson learned "never ever do business with a friend or someone you know very well" Sad but true!!

Thank you

 

Expert:  Richard - Bizlaw replied 1 year ago.
Once the shops were divided, each owner went their own way. Since there is no non compete, the new owner of your shop is free to conduct his business in any way he wants to. I see no basis for any claim of "lost income". I would not worry about it. If you need more help in the future just ask for me.

Good luck.
Customer: replied 1 year ago.

Thanks a lot. I will for sure contact you n future if I need to.


J

Expert:  Richard - Bizlaw replied 1 year ago.
Good luck

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Richard - Bizlaw
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