How can I and my other partners in a business protect ourselfs from another partner who wants to walk out?

Question

Problem is, we do not have a agreement amung all of us as of yet, however we have been to a lawyers as a group and the main partner has verbally made us all partners and the papers have been made to do so, although they have not been signed as of yet. Now, as in today, we have found that the one partner has wrote alot of cash checks to himself and has made statements of "I'm out of here" We all have invested personal money into this and will be in bad situations if he leaves us now. What can we do? can we hold property as in inventory that has been aquired since the partnership was offered to us verbally to try and recover personal money?

Answer 1

better go see an attorney yourself

Answer 2

Unfortunately this is why business insurance exists. Certain forms of business insurance can get you a cash flow to be able to buy up or buy out a partner. Others give you cash at the death of a partner to be able to buy up their percentage of business and then cash goes to the estate, otherwise your business becomes part of an estate settlement and tons of red tape.

Verbal agreements are usually binding, the question may be one of intent. Was the intent a limited partnership or a full partnership. It will make a difference on how the business survives. Sometimes partnerships must be dissolved when one leaves and then the remaining members form a new partnership.

One things for sure, an audit of all your financial assets and liabilities needs to be made by an independent audit firm. If the leaving partner took more than his "share" he may be liable for embezzlement charges. There is also a possibility that a court could freeze the companies assets until the matter is settled and then the leaving partner would have to return the money or face charges until the matter is settled.

This is certainly a matter for the courts to decide. Get your lawyers) on the move fast. If the lawyer who drew up the partnership is also the personal lawyer of the one that's "out of here" then you need a different lawyer.

After this is all settled, sit down with a business insurance broker and get the coverage to prevent this in the future. The broker should be able to handle all the different insurances required to run a business (life, liability, workmen's compensation, accident, etc.)

Answer 3

You say you have been to see lawyers. If the attornies have not come up with a solution, you certainly will not get any better advice on this forum.

I have done a lot of work on labor contracts, so my experience will not directly apply to your situation, but I will share some of what I know.

You talked of papers being drawn up. These papers are not binding on anyone who has not yet signed. All you have left is the "oral contract."

Verbal contracts are as legitimate as those in writing. Problem is that they are much more difficult to enforce. If your only witnesses are those named in your "oral" contract, then any legal action can only be determined by "his" word against "yours."

The attornies have probably already told you this.

If you have any reliable witnesses to your oral agreement, other than those directly involved, then they may offer testimony if the case comes to a hearing or a trial. When you ask about recovering any money, legal action, or the threat of legal action may be required.

And still, no gaurantee you will see ANY of your investment returned. And remember, if YOU signed any other contract with someone else, you may still be obligated to fulfill the tems of that contract. The fact that your partner is leaving makes no difference if his name does not appear in a contract to buy some property, in YOUR name.

Too late for you guys, but the lesson, here, for the rest of us is to get this type of agreement in writing. ESPECIALLY if it will involve money of a large investment of time and labor. This type of contract should specify the names of the parties involved, the obligations of each party, the conditions by which a party may terminate the agreement, and, just as important, the date of the END of the contract. (you don't want to be stuck with contractual obligations forever) You can alway renew the contract. This renewal time is an opportunity to make any changes in the conditions.

Answer 4

you should go back in time, and not be an idiot who puts money into a partnership business without some kind of contract, or proof of investment.

i hope the lawyers get all the money you have left. by the way- how did you ever think the business was going to be sucessful if the likes of you were involved??

Answer 5

Without written contracts you are not in a good situation. It is word against word. Can you substantiate all of the checks he wrote to himself? That is improper use of corporate funds. That should slow him up. Don't be stampeded. See a corporate lawyer.
http://www.nolo.com
Also Cornell Law School's site.

Answer 6

You already made the biggest mistake in starting a business.

The first rule of business is to ALWAYS put a contact on PAPER!!! Especially with family AND friends!!!

Answer 7

Why is your business so dependant on his presence? Was he doing all the work? Were all the good ideas his? Is he the only that knows how to run things or keep it running? Have you done anything to cause him to leave or done anything to motivate him to stay?

If I didn't get my cut of the profits, all my work would be nothing short of slave labor. So... I'm outta here!

Answer 8

Check with a lawyer, but I fear you're screwed.

Can you still stop the checks?

Answer 9

You might have to "off" them.