If my business partner’sassets are frozen and he has my initial investment, what are my options?

I bought into a company for $50,000; a 25% stake. The other person held a 75% stake in the company. A few months later I fund out that he is wanted for running a scam for 4 years and owes the IRS over $500,000 in back taxes. I immediately told him that I wanted out of the company and he told me, “Okay”. He said that he only had enough to pay me and the IRS. He then got served for a lawsuit and his assets were frozen. I transferred the $50,000 to his personal account. A few months ago he plead guilty and is getting sentenced later this month. I don’t want the IRS to get paid with my money.

Asked on September 18, 2011 under Business Law, California

Answers:

FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

The problem that you have is that you are competing with the Internal Revenue Service for limited monies due each of you. If your business partner's assets are frozen per some presumed court order, there is not much you can do about getting back your money anytime soon other than have him sign a written promissory note to you secured by some asset having value such as real estate.

Given the difficult situation that you are in, it would be in your best interests to consult with a business attorney to assist you concerning your situation with your business partner and a possible lawsuit against him for fraud in inducing you to invest with him.


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