Portland, Oregon.
My friend and I started a technology company 4 years ago. It's been a tough road, but we've managed to survive and pay the bills. Originally, my friend sent in all the corporate filings. He registered us as an S-Corp, setup as a holdings company for an LLC (we had planned to run each product as individual LLC's, but only filed for one so far).
The problem is that all the paperwork was submitted with his name as the registering agent and CEO and no other mention of officers, etc. The intention was to have proper corporate bylaws and shareholder agreements drafted, but that was soon put on the back burner when we discovered the large cost involved (my business partner is not that knowledgable on corporate matters, and I'm not signing a shareholder agreement that hasn't been vetted thoroughly). So, we've operated the past four years under the notion that we would someday get everything squared up. I have been involved as an employee only, in order to receive paychecks.
I'm getting concerned that my business partner has no intention of completing the shareholder agreement, and thus maintaining 100% of the company. (We originally decided on a 50/50 split, which has been maintained in our paychecks.) The company has little cash in the bank, however, we may soon sign a major contract which may change that. This new contract will also allow us the funds to finally complete the larger documents. Until then, however, I want to draft some temporary documentation, that I can have him sign, agreeing that I am entitled to 50% of the company, and outlining the timeline and process for completing all the larger corporate documents.
I need advice on the type of documentation that can work as a placeholder until the full documents are completed. Would a partnership agreement work, even though we are not registered as a partnership? I want to be sure whatever is drafted will work within the current S-Corp, LLC structure, even though it's not the full documents. I also need to be careful of tax implications, if any, and if it may change my standing as an employee. I'm mainly looking to cover my bases in a temporary way, should the larger documentation effort be dismissed by my business partner when the day comes. I would never allow this situation to happen again, but we were both inexperienced when we launched, and well... you know how the story goes. Any advice for the type of documentation that could be upheld in court despite my business partner's name being all over the corporate filings, would be greatly appreciated!
My friend and I started a technology company 4 years ago. It's been a tough road, but we've managed to survive and pay the bills. Originally, my friend sent in all the corporate filings. He registered us as an S-Corp, setup as a holdings company for an LLC (we had planned to run each product as individual LLC's, but only filed for one so far).
The problem is that all the paperwork was submitted with his name as the registering agent and CEO and no other mention of officers, etc. The intention was to have proper corporate bylaws and shareholder agreements drafted, but that was soon put on the back burner when we discovered the large cost involved (my business partner is not that knowledgable on corporate matters, and I'm not signing a shareholder agreement that hasn't been vetted thoroughly). So, we've operated the past four years under the notion that we would someday get everything squared up. I have been involved as an employee only, in order to receive paychecks.
I'm getting concerned that my business partner has no intention of completing the shareholder agreement, and thus maintaining 100% of the company. (We originally decided on a 50/50 split, which has been maintained in our paychecks.) The company has little cash in the bank, however, we may soon sign a major contract which may change that. This new contract will also allow us the funds to finally complete the larger documents. Until then, however, I want to draft some temporary documentation, that I can have him sign, agreeing that I am entitled to 50% of the company, and outlining the timeline and process for completing all the larger corporate documents.
I need advice on the type of documentation that can work as a placeholder until the full documents are completed. Would a partnership agreement work, even though we are not registered as a partnership? I want to be sure whatever is drafted will work within the current S-Corp, LLC structure, even though it's not the full documents. I also need to be careful of tax implications, if any, and if it may change my standing as an employee. I'm mainly looking to cover my bases in a temporary way, should the larger documentation effort be dismissed by my business partner when the day comes. I would never allow this situation to happen again, but we were both inexperienced when we launched, and well... you know how the story goes. Any advice for the type of documentation that could be upheld in court despite my business partner's name being all over the corporate filings, would be greatly appreciated!
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Obviously a different relationship now from when the company was just forming. What if I just approached the situation with something like an intellectual property ownership document, to cover my claims in what we develop together? I agree a good corporate attorney is worth their weight in gold, however, financially that's not an option at the moment. Thanks again for any insight Latigo!