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Is a co-founder harming the interests of your company?

Perhaps you and two friends formed a partnership a few years ago. The business you created was doing well until recently, when it appears that one of the founders began working in his own interests instead of those that would benefit the company.

You believe he has violated the terms of the partnership agreement you all signed. Now there is a dispute that threatens to shred the company structure. What is your next step?

Clarity is essential

When you join with others in a new business venture, you must make the agreement among you very clear. In a general partnership, for example, your agreement should set the rules going forward. The document might stipulate: 

  •         The overall goal of the business
  •         The assets or cash each founder invests in or contributes to the business
  •         The percentage of the company each partner is given
  •         The roles and responsibilities of the founders
  •         How key decisions are made
  •         What salaries the founders are entitled to
  •         What happens if one founder does not live up to expectations under the partnership agreement

Reasons for concern

As co-founders, you are all responsible for acting in the best interests of the company. For example, your partner should not take business that will benefit him personally if it rightly belongs to the company. He should not misappropriate company funds or do anything else that would result in harm to your business. If this is what concerns you, your next step is to seek legal counsel.

Settlement versus litigation

Your co-founder may have misinterpreted something in the agreement; in fact, this is often the cause of business disputes. If there has been a misunderstanding and tempers are running high, negotiating a settlement might smooth over the situation. If there is a deeper problem, litigation may be necessary. In any case, an experienced attorney can help you resolve the issue so that you can return to the task of building your business.

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