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Problem with Business Partner!

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stann921

Junior Member
I have some questions about a case that has developed of late and wondered if someone could offer some basic info/advice. Here are the facts (thanks for reading in advance)-

I went into business with another gentleman in May, 2010 (last year). It was/is an internet business, set up as a "Corporation S". We both signed a pre-incorporation agreement with 50% ownership each. The foundation of the business (various websites, documents, manuals, etc) were built/written
from April until about November, 2010. I did most of that work and that is documented.

We got two clients around November of last year, but the economy has been slow and since that time, they have both pulled back significantly on ongoing
payments (they're both still customers, but just paying enough to keep their websites up).

Around February, 2011, my business partner began (I assert) began sabotaging the operations of the company. One example of sabotage is deleting 50 company assets (website) without making an effort to put them back up (even though there was that ability).

In March, he requested a negotiated conclusion to the business. But while he offered the options of buying his half from me, me buying him out, or us selling to a third party, whenever we would start going down a particular road, he would eventually dismiss it. He always comes back with the implied option of me just giving him everything and going away. During this "negotiation" phase, he has acted in a way to steal the business from me...such as controlling the online hosting accounts and pushing me out ever so slowly with different actions like taking one of our clients for himself, deleting my company email address, etc.

Having no options and seeing what he was doing (along with dubious claims he was making), I officially asked him to disclose all financial records to me from the start of the business until today. I even sent him a certified letter to make sure he understood that I was serious. He has refused to send me financials and he has now hired a lawyer. Their position seems to be (I spoke to his lawyer recently for clarification) that I left the company (not true) and that while there is a legal entity, there was no "business" (because some things such as no partnership agreement as outlined in pre-incorporation agreement were not done) and therefore, there are no financial records to disclose.

I believe my business partner has acted improperly on three fronts:
non-disclosure,
non-performance,
and non-negotiation

These are terms that I came up with. I believe the first is a viable/applicable term, the second one is probably viable/applicable, but I doubt
"non-negotiation" is a viable term.


So here are my questions:

1) Do I have a case here? It seems to me like I do but I have never brought litigation on before so am very cautious.
2) Would this be a civil case or another type of case (such as contractual)?
3) Is there a legal term for "non-negotiation"?
4) If I were to bring litigation, would this be created in the county (I am in Georgia) where my business partner resides? The Certificate of Incorporation
shows his home address along with a Delaware address, etc.

I'm sure I have other questions too that I'm not remembering. Thank you in advance for any suggestions/advice!

StanWhat is the name of your state (only U.S. law)?
 


tranquility

Senior Member
Go to an attorney, you are not going to succeed with self help.

Before the attorney, you might review the Delaware corporate code to see if your answers are there.

(Corps become S-corps, this is not a LLP or LLC.)
 
I have some questions about a case that has developed of late and wondered if someone could offer some basic info/advice. Here are the facts (thanks for reading in advance)-

I went into business with another gentleman in May, 2010 (last year). It was/is an internet business, set up as a "Corporation S". We both signed a pre-incorporation agreement with 50% ownership each. The foundation of the business (various websites, documents, manuals, etc) were built/written
from April until about November, 2010. I did most of that work and that is documented.

We got two clients around November of last year, but the economy has been slow and since that time, they have both pulled back significantly on ongoing
payments (they're both still customers, but just paying enough to keep their websites up).

Around February, 2011, my business partner began (I assert) began sabotaging the operations of the company. One example of sabotage is deleting 50 company assets (website) without making an effort to put them back up (even though there was that ability).

In March, he requested a negotiated conclusion to the business. But while he offered the options of buying his half from me, me buying him out, or us selling to a third party, whenever we would start going down a particular road, he would eventually dismiss it. He always comes back with the implied option of me just giving him everything and going away. During this "negotiation" phase, he has acted in a way to steal the business from me...such as controlling the online hosting accounts and pushing me out ever so slowly with different actions like taking one of our clients for himself, deleting my company email address, etc.

Having no options and seeing what he was doing (along with dubious claims he was making), I officially asked him to disclose all financial records to me from the start of the business until today. I even sent him a certified letter to make sure he understood that I was serious. He has refused to send me financials and he has now hired a lawyer. Their position seems to be (I spoke to his lawyer recently for clarification) that I left the company (not true) and that while there is a legal entity, there was no "business" (because some things such as no partnership agreement as outlined in pre-incorporation agreement were not done) and therefore, there are no financial records to disclose.

I believe my business partner has acted improperly on three fronts:
non-disclosure,
non-performance,
and non-negotiation

These are terms that I came up with. I believe the first is a viable/applicable term, the second one is probably viable/applicable, but I doubt
"non-negotiation" is a viable term.


So here are my questions:

1) Do I have a case here? It seems to me like I do but I have never brought litigation on before so am very cautious.
2) Would this be a civil case or another type of case (such as contractual)?
3) Is there a legal term for "non-negotiation"?
4) If I were to bring litigation, would this be created in the county (I am in Georgia) where my business partner resides? The Certificate of Incorporation
shows his home address along with a Delaware address, etc.

I'm sure I have other questions too that I'm not remembering. Thank you in advance for any suggestions/advice!

StanWhat is the name of your state (only U.S. law)?
I agree that you should get an attorney, if it makes sense financially. I recommend a cost/benefit analysis before you go down that road. Where I live, an attorney dealing with these issues would require a $2,500 retainer and would bill out at $200 an hour. That is on the low end; any lower and you are probably dealing with a jack of all trades attorney, and that will cost you in the end.

As to your questions, generally:
1. If your facts are true, probably. Under Delaware corporate law, your partner will owe duties to the corporation and to you.
2. Whether a shareholder dispute or breach of contract claim or tortious interference with contractual or business relations etc, these all fall under the umbrella of civil litigation.
3. I am not familiar with this particular term. However, the fact that he is refusing to deal/cooperate with you would be relevant in relation to many possible causes of action, including breach of duty, interference with contractual and/or business relations, breach of contract, etc.
4. Whether Georgia will be able to assert personal jurisdiction over him will depend on my factors. Google personal jurisdiction for a start.

Again, I'd do the cost benefit analysis first.

Good luck.

oth
 

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