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I've been involved in a startup past 4 years, starting with…

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I've been involved in...

I've been involved in a startup for the past 4 years, starting with 2 others. I am not on any documents of incorporation, but I am currently an officer at the company. I have yet to receive my first dollar salary. I have been promised equity, but nothing has been formalized. As the company is now taking off, I am growing increasingly anxious about the situation. What is ultimately my legal recourse?

Submitted: 2 years ago.Category: Business Law
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Answered in 13 minutes by:
3/7/2016
Business Lawyer: Richard, Attorney replied 2 years ago
Richard
Richard, Attorney
Category: Business Law
Satisfied Customers: 56,754
Experience: 32 years of experience practicing law and a businessman.
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Good morning! Can you provide me a bit more information? I'm presuming that you can substantiate that this equity was promised to you even though it has not been formalized....is that correct? Thanks.

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Customer reply replied 2 years ago
Nothing was ever promised in writing. I have witnesses. There is plenty of real evidence that I have been an employee (business cards, business email address etc).
Business Lawyer: Richard, Attorney replied 2 years ago

Thanks for following up. If they won't voluntarily issue you the equity that has been promised you, you will have to file a suit against them to ask the court to enforce their promises. And, if you are forced to file the suit, you want them to know you will be raising the stakes by seeking not only that the equity be issued to you, but also punitive damages due to their intentional bad faith. If there is nothing in writing, it is a bit more difficult. But, the lack of a written contract can be overcome by the concepts of promissory estoppel, detrimental reliance, and unjust enrichment. This situation arises when Person A relied upon the verbal agreement, Person A performed based on such reliance, and because Person B defaulted, such reliance is now to Person A's detriment. Where there is i) partial performance by Person A based upon the mutual promises, ii) Person A relied upon such promises to perform, iii) Person B's failure to perform would be to Person A's detriment, and iv) result in Person B being unjustly enriched, Person A can overcome the legal requirement that the agreement be in writing. Your situation would satisfy all the foregoing elements. One suggestion that I would make is to get your witnesses to sign sworn affidavits evidencing the promises to protect yourself against them flaking out at you at trial.

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Customer reply replied 2 years ago
Thanks Richard. How about the foregone wages, in my estimation in excess of 2000 hours, do those have to be paid when the company turns profitable?
Business Lawyer: Richard, Attorney replied 2 years ago

You're very welcome...yes, those would be part of your damages. :)

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