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Michael Lykken, Esq
Michael Lykken, Esq,
Category: Business Law
Satisfied Customers: 103
Experience:  Partner at Soares & Lykken, Attorneys at Law
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I need help to determine the right and fair percentage to

Customer Question

I need help to determine the right and fair percentage to offer my partner, who is very dear to me, in two businesses (two LLC's 50/50 with no operating agreements).
I offered him to buy a business with me, that I managed, from my employer. I did tell him we would be equal partners in both business but that I would be in control of the agency #1 and I would give him control of another agency, we will call it agency #2, which is a business that we started together in 2013. I have used my 15+ years experience, knowledge an my intellectual property to advance agency #1 and build agency #2.
With my experience and industry recognition, I introduced my partner to this industry in 2013.
I would like to form a manager-managed operating agreement for both agencies.
I am the currently president of agency #1 and and I made him president of agency #2.
For agency #1 that I have been running for 4 years, we put in the same amount of money to buy agency #1 from my past employer. However, I run the full operations and basically built agency #1 with my name. He has not provided any services or interacted with agency #1 other than his initial cash contribution.
The second agency, agency #2, I built it with an identical platform as agency #1.
I built the programs, websites, marketing materials and all aspects of both agencies. I market both agencies on a monthly basis on top of running the day to day operations for agency #1 and also help with the day to day operations for agency #2. I also used my industry recognition to get him appointed with insurance carriers and taught him and continue to teach him on all aspects or running an insurance agency.
However I need to protect my intellectual property and have full control of agency #1 while I give my partner control of agency #2.
I elected to do a 51/49 split in my favor for agency #1 and 51/49 split in his favor for agency #2. I'm mentoring him and directing him since I have all the experience in this field and he is counting on my experience and knowledge as well as my marketing platform so he may advance his career. Basically, I have the vision to move both agencies forward and my partner is under my wings.
He is objecting to this split and we are at an impasse. Is my split fair or maybe too generous?
Thanks
Submitted: 1 year ago.
Category: Business Law
Expert:  Michael Lykken, Esq replied 1 year ago.

Hello, my name is ***** ***** I am a licensed California attorney. Thank you for using this service, and please understand that I can only provide you with general legal advice in this forum. Also, when I am online I generally respond within an hour to requests; however if I am offline I am often in court or meetings and may not be able to respond until the evening. Now on to your question. Since you don't have operating agreements, the default provisions found in the California Corporations Code, which are found here, apply. There really isn't any right answer to your question about what a fair buy-out provision is. These amounts are often determined through an appraisal of the business (there are discounts that apply and which are taken into account by the business appraiser). I hope this helps, and let me know if you need additional information you need!

Expert:  Michael Lykken, Esq replied 1 year ago.

I hope you found my answer helpful, and if you need further clarification please ask. Otherwise, I am ready for you to rate this answer. Thank you!