If my business partner wants to split an SBA loan to pay it off but I did all the work, can I claim “sweat equity” as my share of the pay off?

Get Legal Help Today

 Secured with SHA-256 Encryption

If my business partner wants to split an SBA loan to pay it off but I did all the work, can I claim “sweat equity” as my share of the pay off?

My sister and I started S-Corp. We bought a franchise. We agreed to quit our jobs to run it together. I quit 2 jobs; she never quit her job. I spent 5 years full-time building and running the business; she came in very part-time. I am planning an exit strategy. We still owe $18,000 on our SBA loan. We have signed personal guarantees. I claim my uncompensated hours of “sweat equity” has to count towards it. She claims I owe half. I did not get compensated for many hours, while she was compensated for part-time work.

Asked on February 6, 2012 under Business Law, Pennsylvania

Answers:

Glenn M. Lyon, Esq. / MacGregor Lyon, LLC.

Answered 9 years ago | Contributor

It depends on what the two of you agreed to when you formed the company and obtained the loan.  If there is no written agreement, it is going to be very messy and you would have to prove that your sister is supposed to give you credit for your efforts.  However, either way, the SBA will still look to both of you for repayment.

If you would like to discuss any issues further, please feel free to contact my office.  The link to my contact information is below.  Thank you.

The foregoing is general information only, not specific legal advice. No attorney/client relation has been created or should be implied.


IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

Get Legal Help Today

Find the right lawyer for your legal issue.

 Secured with SHA-256 Encryption