How can forcibly remove an equity partner from a business if he/she is not pulling their weight?
Question Details: I have started a small business and have taken on two business partners. Each partner was given substantial equity for their contribution. However, one of those partners is simply not pulling their weight. We have tried discussions, persuasion, etc. But this individual consistently fails to meet expectations. It is time to remove him from the picture. The company is pre-revenue, and very little investment capital (no resources to buy him out), and what little we do have was created before he was brought on board. How do we forcibly remove this individual from the company?
SJZ is absolutely correct. I'f be happy to represent you.
Keith Kanouse, Boca Raton, FL
561-4512-8090 x 1
If your agreement does not have a mechanism, dissolution of the partnership is your next step.
Unless your partnership or operating agreement provided for a mechanism to remove a partner, you may be unable to. He owns X% of your company--you can't simply make him give up that ownership interest against his will. If he's a minority owner, the majority owner(s) can certainly make decisions w/out consulting him or against his desires, but that doesn't actually remove him.
One possible option might be to establish a new corporation or LLC or partnership, owned by the other partners, then have that company buy the assets of the current one; if you are pre-revenue, then depending on your assets, finances, etc., you might be able to do so at a very affordable rate without it being pretextual. That would leave the unwanted partner as part owner of an empty shell.
You should seek consultation with an experienced small business attorney with whom you can share all the agreements relating to the formation and governance of the partnership as well as the company's balance sheet and income statement and tax returns.
