legal, co-founderI’m having a problem. A pretty huge problem. My co-founder, that I’ve known for a few years, is behaving in ways that are unacceptable. He uses company funds for private purchases (always bad, but extra bad in a situation where we have very low funds and can’t take salaries because of a lost contract). He is passive aggressive, always blaming me for whatever problems arise. There is always a veiled criticism when he asks questions.
He swears in front of our employees and goes off in wild outbursts of anger targeted at other current or past employees. He lies to me. Initially he wanted to live elsewhere during weekends and be here during the work week. Now he’s away 15 of the work days in a month. I constantly have to cover for him.
There are so many issues that it’s impossible for me to list them all. All trust has been lost between us and I really want to break off and do my own thing. He’s in charge of sales but every contract he signed for our company has been a loss (he’s selling too cheap) and the few sales I’ve done is what has kept us afloat so far.
I know, you all think I’m an idiot for even thinking about this, and you would be right. I need out.
The problem is, how? He’s very aggressive and vindictive, he always wants to sue every single person that does him wrong, he talks about sending mafia members after people that wrong him and stuff like that. He’s half joking and half serious. Typical psychopath stuff.
The thing is, we do have a partnership agreement saying I can’t start a competing business. He knows a few personal things about me that I don’t want coming out. And he’s a violent guy, so I don’t wanna take risks considering I’m married and have kids.
So, how do I break this off with minimal negative effects personally? How do I get him to agree to letting me start a competing business? The market is more than huge enough for both of us, especially since he moved to another country a few months ago.
He did talk about us putting the local company into bankruptcy, something we are close to anyway. That would kind of free me up.
Wow, you are in one hell of a fix my friend,and it sounds very serious.
Do you have any intellectual property assigned to your partnership agreement? And also under what conditions can you dissolve the partnership or fire a partner? I’m sure you have some sort of clause within your agreement that can help you get out.
You need to do this the legal way don’t be irrational. Now you need to collect evidence on his behavior and actions, like real hard evidence, be it receipts, emails, messages, recordings (video and audio) and make sure it is over a reasonable amount of time because short time spans may be inadmissible in court. You have to show some sort of consistency in his behavior, that he has been acting like that for quite some time.
Now since ht is intimidating or violent best present this issue to him with a lawyer besides you so that he also feels threatened and any irrational behavior he exhibits during the meeting can be used as evidence. Talk to the lawyer to review your partnership agreement and formulate a contract for your partner to dissolve your partnership and to make sure he shuts his mouth about it. Also make sure you keep the intellectual property, you can justify that actions since he has been depleting the company funds etc. You can get him under a lot of wrongs; abuse of power/funds,mental issues,not putting company interests first and all.
Hope this helps. PS: Make sure the contract covers your security against him too, you can get a restraining order and security if at any time you feel you are in danger
First off, never give into a bully or bully tactics. Believe it or not, this is the way some people do business. With that in mind you have a few options. Find an experienced business lawyer and terminate the partnership agreement. All agreements are entered in good faith and your evidence of your partner’s irrational behavior would be grounds to cancel the contract based on failure to act in good faith. If need be, take your evidence to the police and get a restraining order as well. If he does anything malicious to you or your family it would automatically make him a suspect with the police and he would be aware of that too.
Along with cancelling the partnership agreement you have the option to
You can also remain passive, let the company go bankrupt or call it quits and then start up another venture without him. This is a non confrontational way that may work without antagonizing him.
Firstly, don’t worry, stay calm !
You need to handle this carefully (use your wits and not emotions in this situation)
Based on your description of him (bad behavior, handling of funds, lack of respect for colleagues, lying and aggressive nature), a possible solution to your problem lies in your question itself, you mentioned and I quote
He’s in charge of sales but every contract he signed for our company has been a loss (he’s selling too cheap) and the few sales I’ve done is what has kept us afloat so far.
You need to “Let the ship sink on its own” ! Stop keeping it afloat by bringing in profitable sales Let him bring in those loss making sales and “Dig his Grave”
You mentioned he moved to another country a few months ago (so that’s good and you need to seize the opportunity before he’s back)
I would suggest you do the following
As sales stop coming in, a time will come when you won’t have money left for salaries, no working capital and would have to naturally shut shop and file for bankruptcy (which would free you up)
When that happens, you could gradually dissolve the partnership. When there is no partnership, you can start another competing company
They key is all this has to happen “naturally” with NO hint of it being planned
Sarcasm: To add a bit of legitimacy and show concern, in the end you might want to thank him for his efforts feeling sorry that it did not work out ;-)
I do not know anything about any legal effect on a business (your partnership) by the bad behavior of a partner. You need to consult an attorney regarding that issue.
You need to read very carefully, and probably with the help of a contracts attorney, the provision in your partnership agreement concerning the covenant not to compete. Does that provision prevent you from working for a competing company in your local? You would have zero current ownership in such a company. The company which you would become an employee could be structured so that you could acquire ownership after the non-compete agreement runs out. Typically such a contract would not be with the general corporate records, thus out of sight. The contract could be with the company, but it could also be with the straw-man owner. Since there would be only one owner (the straw-man) the new business, it would be limited to a corporate or LLC structure.
If there is an issue with the non-compete provision, you have several options of dealing with it. Non-compete agreements are difficult to enforce unless they are very well written. Also, some states have laws that make them unenforceable if you and your family are put in significant hardship. These would be points to discuss with your attorney while reading the non-compete provision.
You would put yourself in a very difficult position should you solicit any of your co-workers to come with you before your actual termination with the business. Soon as you are out the door, you can solicit your FORMER co-workers. Unless there is a provision in any of your agreements that specifically addresses this activity, it is perfectly legal to do. Even then that provision would probably not hold up in court. People are free to work where ever they desire.
I have not mentioned the break-up your partnership because it is guided by state law. State law overrules any part of your partnership agreement that is contrary to it. The ability to do the breakup is purely a legal issue for which you will need to hire an attorney. Also, partnership fights tend to be quite expensive.
A less desirable option would be to locate a business outside the location of the current business. Normally non-competes will only hold up to some where between 50 and 100 miles from the physical location of the orignal business.
No matter what, you are going to be in a stressful situation for a while, whether you leave or stay.
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