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CalAttorney2
CalAttorney2, Attorney
Category: Legal
Satisfied Customers: 10238
Experience:  Civil litigation attorney for individuals and businesses.
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I have a non contributing partner who owns 33% and I want m

Customer Question

I have a non contributing partner who owns 33% and I want him out of the company
JA: Employment law can be complex. But don't worry -- you're in good hands. Because laws vary from state to state, could you tell me what state is this in?
Customer: Illinois
JA: Have you consulted a lawyer yet?
Customer: No
JA: Please give me a bit more information, so we can help you best.
Customer: What information do you need
JA: Is there anything else the Lawyer should be aware of?
Customer: The company is owned equally by 3 partners. There is no profit yet and the company needs personal cash to move forward. One partner will not pay anything into the company nor is he even doing any physical work, he is completely away. If the other two partners invest into the company, the no performing partner should not get the future value or dividends
JA: OK. Got it. I'm sending you to a secure page on JustAnswer so you can place the $5 fully-refundable deposit now. While you're filling out that form, I'll tell the Lawyer about your situation and then connect you two.
Submitted: 7 months ago.
Category: Legal
Expert:  CalAttorney2 replied 7 months ago.

Dear Customer,

Thank you for using our forum. My name is ***** ***** I hope to assist you today.

Unfortunately to deal with a non-performing partner you have to be somewhat flexible in your approach.

There is no mechanism to simply push out a partner unless you actually have a partnership agreement (partnership), by-laws (corporation), or operating agreement (LLC) that allows an owner to be removed at the will of the other owners - in which case these documents will give you that procedure and you must follow it exactly.

But in most cases, the two options that you have open to you are: (1) buy the partner out (so you are going to have to come up with a price that everyone agrees on); or (2) sell the company, liquidate the assets, pay off the debts, and then divide the equity/remainder (then the two remaining partners can start over).

You can force the dissolution of a company by going to court if none of the partners will agree on either of these two remedies.

Short of filing a lawsuit, you can try to mediate the dispute with them - contact your local bar association and request referrals to mediators, a third party neutral can often help you reach a mutually agreeable resolution. Use the bar association's referrals to contact a mediator or two, the mediator will then contact the other party to set up a mediation session, and you can go from there - hopefully resulting in a formal or written settlement agreement, and save yourself the time and expense of litigation.

Mediation is usually a good tool for resolving these kinds of disputes, as it allows you to be flexible in resolving the underlying problems as well as addressing ways to buy out or change the ownership model so that the business is not immediately crippled by a cash flow problem.

Customer: replied 7 months ago.
We have 2/3 majority against the non performing partner. We do not want to disolve the company and I dont want to invest my time and money to build this company while my 1/3 partner sits at home. He will sell his shares but he is asking a ridiculous amount for shares in a company that is upside-down at this time and surviving only on personal funds
Customer: replied 7 months ago.
Is there a way to legally force him to sell at fair market value
Expert:  CalAttorney2 replied 7 months ago.

Unfortunately, your situation is not uncommon.

But you cannot force him to give up his property (his interest in the company), anymore than he could force you to give up yours.

I do recommend that you try mediation if you cannot reach an agreement through direct negotiations.

Customer: replied 7 months ago.
its either disolve the company or put personal funds into it and let him get 1/3 of what im building?
Customer: replied 7 months ago.
He is refusing to sell at fair market value
Customer: replied 7 months ago.
If I go ahead and invest in my company is he intitled to 1/3 of the profits?
Expert:  CalAttorney2 replied 7 months ago.

Unfortunately, you are in a position of trying to deal with a problem on the "back end" - so when a problem has already arisen, rather than on the "front end" - such as when the company is first being formed. So your options are much more limited.

Again, I would strongly recommend you try mediation. A third party neutral can help facilitate a negotiation in a more productive manner (it is what they do for a living, and most are quite good at it - do call around and see who you are comfortable with before hiring one). When confronted with an option of "we are going to simply sell everything off and you are going to get "xyz" as compared to "we are willing to pay you this reasonable sum" - they may take it. It is probably going to cost you more than you want to pay, but it should be less than what he is demanding.

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