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How to eject cofounder?

What is the best way to oust an uncooperative cofounder from an LLC? We do not have an operating agreement and do not have money for a buy out. This founder wrote our software, which technically we do not have rights to use.

  • Was in the exact same situation many years ago, but ended up doing nothing and it eventually ended the company.

    I don’t have an answer other than go through with it before it’s too late.

    Reply

  • You have a few options… get an investor to buy him out, negotiate an equity stake that is vested and which he can keep and do nothing going forward, or do nothing. There have been a few high profile cases where the founders swept issues under the carpet until the first institutional round. As long as you’re successful investors are happy to deal with shit and help fix your ugly issues because they want in.

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  • So you want to eject an “uncooperative” nerd. You did not write the code, and you could not get a decent business structure together, and apparently you can’t even keep a “nerd” happy. So, what are you good for ? Are you the “idea guy”, or the “marketing genius”, the “visionary” ?

    Lick your wounds and give your co-founder some respect. He has the upper hand.. Or if you really think you bring something to the table that he does not have, start over and get a decent business structure in place to begin with.

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    • Spoken like a true developer who believes they can never be replaced. Listen to the above, negotiate a way to get him out then hire another developer. Great engineers are worth every penny they are paid, but it doesn’t excuse them from getting work done on time or being able to gel with the team.

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      • No my friend: both the developer and the business idea guy are replaceable. The point is that the latter is even more replaceable, if they don’t have the EQ to deal with an uncooperative partner, and the foresight to create a decent business structure.

        The give-away here: “technically we have no right to use the software”. “Technically” most likely means legally., so the: uncooperative developer has the upper hand.

        OP, needs to stop asking for advice in anonymous boards and consult with a lawyer, or swallow their pride and mend fences with the developer. He cannot just “oust” them, without shelling out $$ or equity.

        Good luck.

        Reply

          • Developers are a dime a dozen. You can go to any major city and find 100 of them in a day.

            The intellectual property belongs to the person who created the idea and delegated the task of having it built. The delegating person also is probably the business guru, who has an intimate working knowledge of the business and connections to execute.

            Find a way to ask for your stuff back (equity) under some terms wherein they’ll be happy to do it, call it restructuring and assure them its for the best. Then say its not working out and you have to move on. Probably also be helpful to find something that will keep them occupied for awhile so they don’t ruminate and will be a show of good faith for the emotional devastation you just put them through.

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  • I suppose you could try a royalty agreement. That avoids a large payout, allows the developer to take a passive role (Sit back, collect royalties) rewarding them for work done, but reduces their reward in any upside(and also risk) Of course then OP probably needs to bring on another developer and probably equity only.

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  • depends, could vote him out, then do squeeze/freeze out; the legalities are a bit fuzzy. Does he have over 20% equity?

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