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Tina, Lawyer
Category: Legal
Satisfied Customers: 33167
Experience:  JD, BBA Over 25 years legal and business experience.
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I started a dance studio and dance wear store (brick and mortar)

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I started a dance studio and dance wear store (brick and mortar) (LLC) with my in-laws six years ago. They put in about $330,000 cash, plus co-signed on a $142,000 business loan, which was secured by their property. I put in all my expertise, no money. The partnership was split 80 (me) 20 (them), and the goal was to eventually pay off all the capital they had invested and for me to take over the business 100%.

Then, the economy plummeted, and we have struggled for 6 years, barely scraping by. I had been taking $2,000 a month as pay, and claimed it as a loan from the business.

The bank loan has been brought down to $122,000, and we just renewed it. 5 years after we opened the brick and mortar dance wear store, we opened an online dance wear store (both my mother-in-law and I worked on developing this).

Since the online store was doing better and needed more attention, and we were having trouble getting along (ex: in who has the final say, etc.), we decided to split the two. I own 20% and my mother-in-law owns 80%. (My mother-in law took over the online store and I, the dance studio). My husband and I separated, and I was running the dance studio as a single mother. The sales dropped, and we lost our lease with the landlord. Currently, we have a buyer for the dance studio who would like top purchase it for $40,000.

Now, my in-laws say that when I sell the dance studio and brick and mortar store, they will be opening a new dance wear store a few miles away. They want me to sign on paper that I will owe nothing of this new store, in exchange for me not having to pay them all the money that I "borrowed" from them. In return, they will be taking all the inventory(valued at around $80,000) plus the fixtures, client list, software, computers etc.

I feel torn between being ok with this and being upset that I have worked for the past 6 years on a business, and am left with nothing. At the same time, I feel very guilty that they lost all this money they put into the business, though the online store is doing awesome, and if managed right, can and will pay off all their investments within 5 years or so, plus they will be bringing in substantial amounts of money (Based on the past year's growth rate).

My Question is, should I just let them have the business, or should I fight to keep my 20%? They have said that even if I own nothing in this "New" business, I am still morally obligated to pay them back what they invested. Is this correct? Or should I feel fine with having them take the business?


Hello and welcome.

My name is XXXXX XXXXX my goal is to provide you with excellent service today. I am sorry to hear of your difficult situation. Before I can give you an accurate answer to your question, please provide the following additional information:

With regard to this new dance wear store that your in-laws intend to open, would they be breaching some agreement with you by opening the store? On what basis would you assert an ownership interest in that new business (20%)?

I look forward to assisting you as soon as I have received this information. Thank you.

Customer: replied 4 years ago.



The current store we have now is called La Pointe (LP) and the new one

The dance wear Shoppe (TDWS).


They expect me to close LP (Even though that part of the business is profitable) so that they can keep the accounts with the vendors. If I move the store and keep it running, they will not be able to have the accounts, since the vendors only open a few in each area, and have to be at least 20+ miles away from each other. I could, if I wanted, move LP to another facility and keep it going, but that would mess them up.


I do have 20% ownership in the online dancewear store. It is in our signed agreements, so they would be in breech, unless they close the online store and re-open under a new entity. (Which I think they want to do)

I see. Thank you for providing this additional information, Evelyn. It leads me to another question if you don't mind. IF you were to assert your interest in the online store, would your interest be enough to pay down the loans you owe to your in-laws, together with the income generated by the dance studio?
Customer: replied 4 years ago.

That depends what we value the online store as, but currently, I would think no.

OK, that is what I had originally believed based on the information you provided. Given that, the in-laws could cause you a great deal of legal trouble, cause you to incur substantial expense and potentially ruin your credit rating since it does appear you are in breach of the contract.

Because of the potential for this, it would typically be best to agree to be released from the balance of the loans they made to you in return for the demands they have made.

I certainly understand the emotional and psychological impact such a decision must have on you, but it does sound like a reasonable offer, which you would probably be wise to accept.

If they intended to do so, they could keep your business interests tied up in litigation for a prolonged period of time, causing a great deal of stress and additional cost, so I would typically cut my losses at this point and move forward with something more positive.

It would be best for you to have any documents they present to you reviewed by a local attorney to ensure they cannot later claim you are obligated on the loans for some reason or otherwise interfere with your future business ventures.

I hope this helps clarify the situation for you. I wish you all the best in the future! Please remember to rate my service once you have all the information you need. If you have any other questions, please ask me – I’ll be happy to respond. Thank you!


Customer: replied 4 years ago.

Do you think I am morally obligated to still pay them their investment back if I do give them 100% ownership?

Hello again, Evelyn.

No, not if you give them 100% ownership in the business. I would make sure the settlement is in writing though, so they cannot later pursue a legal action against you for any balance owed.
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Thank you for your positive rating of my service. I hope you are able to resolve this matter with your in-laws very soon. It has been my pleasure to assist you and I hope you will ask for me should a future legal need arise.

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