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CalAttorney2, Attorney
Category: Business Law
Satisfied Customers: 10244
Experience:  I am a businesses law attorney, with experience advising and representing owners and investors.
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I'm considering on bringing in a business partner to operate

Customer Question

Hello, I'm considering on bringing in a business partner to operate my salon. We plan to form a new LLC together and transfer asset and liabilities to the new LLC. The new partner requested 50.5 Shares/Ownership as they will be handling all the operations. Should I be concerned about this? Also the partner will be making no buy in or initial investment. Partner plans to submit a letter of intent.
Submitted: 1 year ago.
Category: Business Law
Expert:  CalAttorney2 replied 1 year ago.

What you ultimately do is up to you, but giving someone a majority share of your business operation for nothing (no buy in, no investment) is a high risk course of action.

Even a .5% majority is sufficient to turn you into a minority member of this new LLC and place you at a significant disadvantage in any decision making process (if there is a disagreement between a majority and a minority member, the majority's decision carries).

There are some protections for minority members, they cannot steal from the corporation, or abuse their majority position, but you will lose a significant amount of autonomy over this.

(I would be very concerned about this - I gather you are already operating a going concern and this new individual plans on coming into your business to offer their "know how" in exchange for a majority role. This doesn't sound like a very fair transaction).

Customer: replied 1 year ago.
Thank you. My business (distressed) currently does not have a positive cash flow. In good faith they paid for my lease last month, as I almost lost my business. No agreement had been set, yet. I submitted this proposal and they(Studio DNA) said they will create a letter of intent based on what I wanted. They will be bringing in products, new hires, and operations and handle paying all expenses, lease, etc. Here is what I proposed: I'm Dean Management, LLC by the way.
Expert:  CalAttorney2 replied 1 year ago.

Dear Customer,

I cannot review your specific documents (we are a general legal information forum), if you want an attorney to review your specific documents and offer formal legal advice or instruction you will need to meet with a local attorney. You can find local attorneys using the State and local Bar Association directories, or private directories such as;; or (I personally find to be the most user friendly).

Ultimately, this is a business decision that you need to make - is taking on a majority "partner" (technically a majority member in your LLC) worth it to you? This is something you will need to answer as you will have to work with them. Make sure you have done some due diligence (looked into their background, other people they have worked with etc.) and have a good idea of what you are getting into. Hiring a lawyer to look through your contract may be a good business decision (I understand things may be tight if you had difficulty making rent last month, but this contract will change the way your business is held, and that lasts for a long time, so it may be worth it to take some additional measures).

Customer: replied 1 year ago.
Ok thank you. Sounds good.
Expert:  CalAttorney2 replied 1 year ago.

You are welcome, and I do wish you the best with this matter.

Thank you for using our forum, and please do not forget to rate my service so that I can receive credit for assisting you.

If you would like to direct future questions to me specifically, you can do so by starting your new question with "For William B. Esq." and a moderator will notify me.

Thank you again, and again I wish you the best.