Legal Question in Business Law in California

Re: Buying out a partner

There are a number of issues for all parties, such as taking on prior debts. See an attorney.

Re: Buying out a partner

A notary does nothing but authenticate a signature as being from the person claimed. It is of no value in your situation unless the seller is out of area and you can't be sure he really signs a document.

You need an actual, legally enforceable, detailed contract and agreement that clearly lays out the numerous rights and responsibilities of the parties.

"Partner" is clearly not the correct relationship - there should be a corporation [I suspect there is already] in which he should become a shareholder, officer and director. The corporate books and records would then have to be amended properly, with issuance of stock, and all appropriate notices given to the state and federal regulatory agencies. Etc, etc.

It is not condescending to you to say, you obviously need legal counsel to do this right. Are you really willing to fork over $50k+ without understanding the risks involved? Have you undertaken a 'due diligence' investigation of the business to see if it is a sound investment, or is the guy just taking your money to make payroll or leave town?

Feel free to contact me if interested in doing this right, and avoiding losing your money right up front. If and when properly set up in the company, it will be up to you to ensure the company is well run and makes money, rather than losing your investment.

Re: Buying out a partner

Aside from legal advice, what you need most is business advice. What, if anything, do you know about running a business? Did you take business courses in school? Do you have a business plan? Have you seen the books for this business? What are you buying for $50K, a building? equipment? You could contact SCORE (The Service Corps of Retired Executives) for free business advice. And one last word: Don't become anyone's "partner."

Re: Buying out a partner

As the other attorneys have stated, you need to focus on a much bigger picture than just whether a notary is needed or useful for "protection."

This is sort of like asking if thick wool socks are a good idea for protction during a long winter hike across Afghanistan. Sure, maybe, for some aspects of the journey, but you are asking the wrong question.

You need to be more concerned about things like (1) going over the books with an accountant to see if there is real profit being produced; (2) asking how much of the business, and hence what share of the profits, does $50,000 buy (it could be 99%, 50%, 1/3, 1/100 or maybe less), whether other co-owners could be brought in later to further dilute your share, whether profits are distributed or reinvested, whether the business is a partnership, corporation or LLC, how it is controlled and managed and whether a $50K investment buys you a seat on the board of directors or, more likely, NO say in management whatsoever, and on and on.

The bottom line is that I would NEVER invest $50K in any business based on working there for eight months without having both a lawyer and a sharp accountant go over the whole deal with a fine-tooth comb. Nine times out of ten the buy-in will end up being the exact equivalent of a bad loan, but because it was an equity investment instead of a loan, there is no debt to sue on.

Caution, caution, caution!