Can a business partner use assets gained from a previous business as a claim to increase his/her shares in a new business partnership?

UPDATED: Aug 6, 2012

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Can a business partner use assets gained from a previous business as a claim to increase his/her shares in a new business partnership?

One of my business partners invested 30K into a previous business & the owner of the business got evicted and he gained assets & 1st rights to the space. Now, we are involved in a new business (restaurant) & he claims 30K from his previous investment is valid as part of his shares even though he can sue the other owner from before & get his money back. He is the majority shareholder at 65% and the remaining 3 are: 15%, 10%, & 10%. Is his claim valid as restaurant equipment is depreciated, but he claims the build out justifies the 30K? Can the agreement be re-drafted if signed already?

Asked on August 6, 2012 under Business Law, California


Cameron Norris, Esq. / Law Office of Gary W. Norris

Answered 10 years ago | Contributor

If this partner contributed equipment and the partnership agreement indicates that the equipment was worth a capital contribution of 30k, then that's valid.  He can't just magically move over a previous business contribution into the new business.  BUT, if he contributed capital and the other partners in the agreement agreed that capital is worth 30k, then that's what it's worth.  Didn't you sign the agreement stating that he would get a 30k share based on that old equipment?

At this point if you signed the agreement--you are bound to it, unless there was outright fraud. However, if you start fighting the other partners this early in the game--you will probably get pushed out of the partnership.

It sounds like you are having some regret and are feeling that you didn't get a large enough share.  You are not the first partner in a restaurant to feel that way.  This is why it is always best to work with an attorney to draft a partnership agreement that is fair and plans for many different contingencies that arise. 

Best of luck.

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