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My business is being sold how is the sale price divided

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My business is being sold how is the sale price divided
Submitted: 1 year ago.Category: Business Law
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Answered in 1 minute by:
6/22/2016
Business Lawyer: Kim Courtney,
 replied 1 year ago
Kim Courtney
Category: Business Law
Satisfied Customers: 4,219
Experience: Founder/Member at Food Business Association
Verified

Hello, I am happy to assist, but you need to provide more information. What type of business (corp, llc etc), how many owners are there, what are the percentages of interest, is there an operating agreement, etc.

Thanks

Kim

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Customer reply replied 1 year ago
llc, FINA pizza bar I have a signed operating agreement. Names and percentages of initial members Anthony Carruba 75%. Nicole Cuccia 25% the business is being sold for 190k and the other partner is telling me it's a 3 way spilt because of a personal loan from his dad. The dad has no name anywhere listed in the business nor was anything signed. I have never received 1 dime from the business. Anthony keeps all the paper work taxes, credit cards I have not seen 1 document.
Customer reply replied 1 year ago
He also said he has paid his dad 1000 a month over 2 years
Business Lawyer: Kim Courtney,
 replied 1 year ago

Great, thanks for the additional details.

Have you held regular annual meetings of the members? It doesn't sound like you all agreed to those 1,000 per month payments to his father, which would have been required.

You are entitled first to tall the documents. Everything. Don't accept anything else.

If there was a loan from his dad, there would have to be a promissory note to him from the members in order for that to be legally binding as a loan that is due to be paid back out of the proceeds of the sale.

So no promissory note, then his dad doesn't get that money back. You also should probably get back those 1,000 per month payments legally, so that would come out of the person who gave the monthly payment's share of the sale profits.

If there is no other indication in the operating agreement of how the proceeds would be split, then the percentage of ownership will govern. Sounds like 75%, 25%, 25% split to me.

Let me know if you have any follow up questions about this.

Kim

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Customer reply replied 1 year ago
No no promissory notes absoultey nothing. I personally gave over 65k as interest into the business Anthony Carrubba was sweat equity. So in dollar terms what would be the amount I would walk away with. He also just informed of the sale and taking money off the sale for a personal loan from his sister and friend there is no paperwork no notes his word.
Customer reply replied 1 year ago
He informed me of the sale 2 days ago. I have not seen the proposal or met the buyer
Business Lawyer: Kim Courtney,
 replied 1 year ago

Ha, ok, so I just wouldn't tolerate any of that.

If it's not in writing in a legal document, nobody gets anything back from any "loans" they may have given. Those were legally gifts to the business.

I would get all the documents and look everything over closely, because I suspect you will find other problems.

Keep in mind, you have the right to approve the sale, so you can also refuse to sign the documents and try to find a buyer at a higher price!

Kim

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Customer reply replied 1 year ago
I know I'm being swindled but I have asked numerous times for the document he has refused. In the end if I took the sale price what would be my take away as far as dollar amount. All the while my mom has been diagnosed with the braca2 cancer gene and I'm waiting on the results as well as my sister. I'm dealing with the devil
Business Lawyer: Kim Courtney,
 replied 1 year ago

Well there could be a benefit to just cutting your losses and getting out now, so that is an argument in favor of just letting the sale happen. But you should balance both sides of the coin.

I can't tell you how much profit you would walk away with because I have no knowledge of the company's assets and liabilities. You have to get all the paperwork and figure that out. It is not acceptable that he won't give it to you. You can easily get a judge to order him to give them to you if it comes to that. That is the most basic requirement so that you can know what money you are entitled to.

If that is going to be too much of a major headache and you want to just get out as quickly as possible, you could make a demand that you get x dollars from the sale (as long as it isn't more than you could be legally entitled to) and that you will agree to sign the sale documents. That's an option.

Kim

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Customer reply replied 1 year ago
The business has no other outstanding debt the new owners are taking it as is. Can u provided me With a round about dollar amount I would walk away with? is small pizza brick oven 4 employees.
Business Lawyer: Kim Courtney,
 replied 1 year ago

If I understand correctly you have the 25% share, right?

So from a sale price of 190k with no liabilities or any other items being subtracted from that, your share would be $47,500 as a 25% owner.

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Customer reply replied 1 year ago
He being Anthony just called me and said the lawyer is going over the proposal to sell I want to knowledge behind my words or a least no the dollars amount I wld walk away with
Business Lawyer: Kim Courtney,
 replied 1 year ago

Right, so it sounds like you would be around the $47,500 amount as a 25% owner of the business.

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Customer reply replied 1 year ago
Wld that be separate from the investment
Customer reply replied 1 year ago
My money that I invested
Business Lawyer: Kim Courtney,
 replied 1 year ago

That would be the total that you would receive.

The investment was supposed to be factored into the percentage of ownership, or specifically outlined as an additional payment in the operating agreement as owed to you first before any profit is shared based on ownership interest. But you could still demand it from your partner and threaten to block the sale if he doesn't give it to you. I just don't know that you would technically legally be able to get that money back if you went to court, without a promissory note to the company or something in the agreement that you get that back first.

However, that being said, sounds like Anthony created a nice mess for you, and has been taking money out of the company that you did not agree to, so maybe the sale price would be much higher if everything was handled properly.

Also note I did not take into consideration any cash in the bank or other assets, although your buyer is probably buying the equipment and furniture etc. But there may be cash in the bank. You would get 25% of that as well.

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Customer reply replied 1 year ago
Over 65 I invested I have him admitting that amount and do have check deposited into the FINA acct
Business Lawyer: Kim Courtney,
 replied 1 year ago

Right, so you are asking me for a legal answer. I understand that you actually did give that amount into the business. If you were to go to court you wouldn't get that back, because the judge would have to see if there was a promissory note or an agreement in writing that you would get it back.

However, you are in a good situation in terms of negotiating with him, because he hasn't handled the business well, and you can just say you want your investment back. I would ask for something like 65k back that you invested, and then split the remainder and you get 25% of that which is $31,500, so the total would be $96,250 for your share.

I do think that is a fair way to go, I just want you to be aware of your legal rights as you are negotiating.

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