Legal Question in Business Law in California

Forced out of business by one partner, how do I recover money due from business?

I purchased a liquor store using a LLC with 2 others (I will call them John and Mark here) in Oct 2005. I quit my job to manage it along with John. However, a few months ago I was forced out of the business due to differences with Mark (who is the main investor and sleeping partner). I verbally agreed to take a payout of $45,000 and so far I have been paid $22,000. I have post-dated checks that show the amount due to me now - this is the only proof I have for the money due as a partner. I was not a partner on the LLC papers but I was the authorized signatory for the bank checks and the second phone line is in my name. I can also produce witnesses who can testify to me being a partner.

When I was forced out, I was that I would get the full amount if and when the store is sold. Now, Mark has agreed to sell the store to John and refuses to pay the remaining balance to me. My questions:

1. What rights do I have to collect the money due to me?

2. What type of lawyer can I see for this?

3. Will filing a court case put a lien on any escrow opened?

4. The checks made out to me are from the Liquor Store signed by John (the 3rd partner) - not from Mark so is Mark still liable for this breach of trust?


Asked on 4/09/07, 9:03 pm

4 Answers from Attorneys
OCEAN BEACH ASSOCIATES OCEAN BEACH ASSOCIATES

Re: Forced out of business by one partner, how do I recover money due from business?

You may dissolve the partnership and start negotiations from the beginning, then the other partners may decide to perform on the original agreement and pay you the balance owed. Contact me directly for assistance.

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Answered on 4/11/07, 2:39 pm
Daniel Harrison Berger Harrison, APC

Re: Forced out of business by one partner, how do I recover money due from business?

(1) You may have an enforceable verbal agreement. (2) A business litigation lawyer. (3) No, unless you seek a prejudgment attachment order. (4) Whovever promised to buy you out owes you the money, whether it was the LLC, Mark, or John, or all of them.

Let me know if you need help. We practice business litigation out of Newport Beach.

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Answered on 4/26/07, 7:59 pm
Matthew Mickelson Law Offices of Matthew C. Mickelson

Re: Forced out of business by one partner, how do I recover money due from business?

You may have the ability to sue your former partners for breach of an oral agreement to make you a member of the LLC, and for breach of the oral agreement calling for a $45,000 payout. You should look for a lawyer who is familiar with small business transactions/disputes. If you'd like to discuss this further, feel free to contact me.

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Answered on 4/09/07, 9:12 pm
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Re: Forced out of business by one partner, how do I recover money due from business?

It might be helpful as a starting point to be clear that persons who are co-investors in an LLC are not partners. Partners are people who associate to run a business as a partnership. (However, since you are apparently not a member of this LLC even though you thought you were going to be, and you invested in it with that in mind, a court might in fact find that you are a partner.)

I can offer kind of general answers to each of your four questions:

1. Your right to receive the balance of the $45,000 is pretty clear, assuming the other side doesn't have good counter-claims against you that you neglected to reveal, or some other unexpected condition governs.

2. You need a lawyer who is ready, willing and available to spend time thinking about your situation and will really go to bat for you, rather than just generating billable hours. The legal issues here are not so unusual or difficult that you need a high-powered specialist. Use a lawyer who has some experience in litigating quarrels between people in business relationships with each other, to be sure; but the most important thing is to find someone where your case will not just be a number on a file folder, but where the attorney will really spend time today, not next month, working on your issues.

3. Probably not, although a plaintiff is usually permitted to try to get a pre-judgment right-to-attach order if the defendant is demonstrably flaky and likely to hide assets or abscond.

4. One way or another, you will probably be able to pin the liability on the true culprit. That will be a major part of your lawyer's job, to plead and prove liability where it ought, in fairness, to rest.

To sum up, your case sounds pretty strong, but it is not one for the average slip-and-fall or unlawful detainer lawyer to attempt. Also, the dollar amounts involved are not large and that makes it a bit risky from a net return to you to hire a lawyer standpoint.

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Answered on 4/10/07, 12:45 am


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