My business partner and I are in disagreement over her ownership percentage.

Additional Information:

I started a business 6 months ago with a partner. We decided we’d see if the business is really viable before having a lawyer draft an agreement.  It was my business plan, I do the majority of the work, and I contributed more money to the venture than she did.  We work out of the apartment on my Newton property, I pay utilities and property tax.  My understanding was that the ownership was 60-40 in my favor. She now claims that she owns 50% of the company. What can I do?

ATTORNEY ANSWER:

Unfortunately, this situation arises quite often when people start a small business without consulting an attorney. What could have easily been spelled out in a written agreement at the commencement of the business now has the potential to lead to costly litigation. What you have explained sounds like an “oral partnership” or possibly an “oral joint venture.” 

My strong suggestion it to first attempt to mediate this dispute and try to come up with an agreement you can both live with going forward. Based upon your email, it seems that you have contributed the majority of the capital and the “sweat equity” so  I am not quite sure why you agreed to the split of ownership that you did. If you can come to an arrangement, you should document the terms of this settlement clearly in writing. You could consider an LLC, an LLP, an S corporation or a general partnership agreement.

If you cannot come to an agreement, it would seem that you would need to dissolve the partnership and file a lawsuit for an accounting of the assets, profits, and losses. Goldman & Pease, LLC has represented many small businesses in establishing the terms of their business in writing and we have also been involved in litigation with several cases involving allegations of an oral partnership. Please feel free to call us to discuss your options.

The Newton Business Litigation Attorneys at Goldman & Pease provide legal representation for contract disputes and all business related matters in Newton, Massachusetts and the surrounding communities including Needham, Brookline, Dedham, Westwood, Dover,  Wellesley, Weston  and the entire Boston Metrowest region.