Can I fire a business partner that has 33% of shares?
I own 66% of shares and my business partner has 33%. My partner promised big things and has failed to deliver on all fronts. He also spends 40 - 50 % of his time working on another business while myself & my wife work 7 days a week on ours. We are carrying all the debt to Family and banks, when he hasn't supplied $1. I need to oust this guy.
How do I get rid of 33% LLC partner who is not pulling any weight?
That will eventually effect your business, if you are working that hard with your family and he's not even supplying $1, why did you set him partner? For the long run, set a legal deal and bid him a farewell.
You can, but before doing this you need to clarify al things with your partner to get escape from future issues
Yes, you can. Before you do, have a meeting and state that you are not happy with the arrangement and want to buy him out. Give the amount you think the 33% are worth and when and how you're going pay that. If that does not go well, fire him, get an attorney, dissolve the entity and start anew with no partner.
Yes, you can if he does not deliver on all fronts as you mentionned. In order to move forward, get rid of all those who drag you backwards. The sooner the better or else you will end up wasting lots of time, energy and most important your health.
It's depends on your agreement, but ground realities says that fire the partner,...
Is your business a C Corp, LLC or some other partnership. The corporate structure of your business and the state of incorporation, and your incorporation documents, be it by-laws, llc operating or partnership agreement, will determine what you can and cannot do as suggested by prior comments.
Review your partnership agreement with your business partner. It should have an Exit Strategy (or a section that discusses how you intend to deal with things when they don't go as you expect).
If your partnership agreement doesn't include that -- and he is a "partner" (versus just owning shares) - you can buy him out (or buy back the shares). If he is an employee with shares, you can certainly fire him and he can keep his shares.
And in the future - include an Exit Strategy in your business dealings.
Yes you can always do that.But before that please calculate as how much loss or profit you are going to make directly or indirectly.Always pro and con your options.
HI, I have looked these questions and it does bother me that there are few questions asked of you. Ultimately, there are some bigger issues and a right way of doing things depending on the facts that will avoid serious legal based reactions. If you want a serious answer and an actual strategy which is what you need then please contact me.
You can buy out a partner but his ownership as zero relevance to how much he works in the business unless that is specially covered in your agreement.
And your labor or dollars invested don't allow for you to demand anything that he didn't agree to do. I see a statement "he didn't work or invest $1" as sour grapes drivel unless it's a breach of contract.
All this is guesswork based on a lot of experience. Worthless if your written agreement says something else. I've guessed that you have a friend you tried to get work out of with a promise of equity. Regardless of your relationship with him, get something in writing and adhere to that rather than emotions.
Only if you or someone else buys his 33% share. Currently he's a co.owner and you can't fire him.
First off you don't have a partnership so there should be no partnership agreement. He is a minority shareholder. You are the majority shareholder so you can do whatever you please. You control the company.
Just remember the old saying "Hell hath no fury like a minority shareholder scorned" or was that about women? Try to keep it civil and offer to buy him out. Since you control the company it would be to his benefit to sell his shares to you. You always have the option of setting your salary high enough that there never are any profits to which he would be entitled to 33% of. Still it is better to get rid of him so you can retain earnings and build the company for the future. Going back to the fury part try to be civil and sound like you are appreciate of his help but are disappointed that he can't do more and really need to make the change. Since he has no money invested and no time invested he might be receptive to a minimal buyout if you handle him with kid gloves.
I do agree getting professional advice is a good move in this situation.
Minority ownership is like being an employee, you have no control. I am going to guess I am right about a few things, primarily there is no partnership agreement which is how this would be addressed. Since you ask question and there is no agreement, you should have no obligation to pay him and can buy him out based on almost any valuation you choose. This is my opinion and using an attorney is preferred but again if you had one I don't think you would be asking the question. Send him a letter telling him you are buying his shares for $100 and include the check with the letter. In the letter, just say the firm has made a business decision, reference a meeting date that the decision was made and say nothing more (don't explain yourself).
Experience says...have a discussion it that doesn't work, close the business and start another entity.
Since you identify your business partner as your "partner" and not as an employee, independent contractor, member, or other business relationship, you should review the governing partnership agreement provisions about how a partner can be removed (bought out) or forced to retire. Absent provisions to remove or retire a partner you would then look at the partnership agreement provisions about terminating the partnership, but consult with a tax attorney or tax CPA before you terminate your partnership. If your entity is not a general partnership or there exists no partnership agreement and/or the other business owner is not actually your partner, then you will need to consult the governing agreement (LLC operating agreement, limited partnership agreement, corporate by-laws), review state law, and then consult with business legal counsel and your CPA.
Don't ever confuse equity ownership and employment. They are not the same. Equity ownership does not imply employment and vice versa. You own the majority of the shares at 66% and therefore you control things. You can and should fire him quickly. He'll get to keep the shares, but that's a small price to pay.
As Kevin says, you should, if you can, offer to buy his shares so you are rid of him. It will cost you, but he can be a thorn in your side for a long time if he continues to own shares.
Consult an Attorney. My thoughts are these: Yes, you can fire him! You can ban him from coming into the office. However, you can't take back his shares. He will still be entitled to 33% of the business. The best option is to buy him out. If he won't sell, liquidate the business, reform under a new name and start over. Of course, make sure you do it ALL legally. This is why EVERY partnership needs an operating agreement in place for every partnership!
What are the terms in your letters of incorporation? This inevitability is covered there in most cases.