I enlisted a business partner to join me in purchasing a franchise business. Our intention was to quit our jobs to run the business. We each signed the Franchise Agreement. We started an S-Corp, with my partner as the VP and I as the President (51% ownership). We signed for a $70,000 SBA loan. We signed a commercial lease for the retail location. I fulfilled all obligations to get the business opened. Two days after our Grand Opening, my partner refused to quit her job and join the business full time. She did work part-time (about 20%) while I put in very long days, many unpaid, to cover the other 80% to get the business off the ground and keep it running to pay the bills/loans/lease. It is now 6 years later, and our SBA loan is almost paid off. I have notified my partner that I am not going to renew the lease and will not continue in the business. She has no intention of keeping the business. We are trying to sell, but it did not make any money, so we will probably just close it. I have made it clear that I have no obligation to pay the remainder of the SBA loan, as my time has paid off my share, but she insists my legal signature obligates me to pay half. There will be about 5,000 left to pay. What are my options in this situation? Unfortunately, we did not have a partnership agreement, just a verbal commitment.
1 Answer from Attorneys
Response by Attorney Michael Kotik. It would be difficult to answer this question without seeing the actual SBA agreement. I would tell you that a verbal agreement is still valid. However, to answer your question we would need more information as to what had actually happened, the type of business, other information. If you would like to discuss this matter further please feel free to contact me at [email protected]