So I incoporated under florida law as an LLC, and I own 100% of the company. My friend and I decided to work together, but I never distributed equity because we were still negotiating terms. He wants to sue me for “cofounders” equity, and he didn’t invest in the company I did, as well as I took on the role of design and outsourced the development. He is hemmoraging the company, and holding us back. Does he have any legal grounds to sue me?
Do you have any legal documentation entitling him to equity?
No legal documentation, i never distributed equity
This person is clearly not your friend. Perhaps paying him off is the best solution, perhaps not. Either way, after this betrayal you have to cut him from your life, personally as well as professionally.
If there’s any written or digital communications that you agreed to start a company with him he would have grounds to sue you.
I suggest talking to an attorney. Most will give you an initial consult for free assuming you’d use them to craft any agreements with them later.
I would suggest either offering to buy him out or give him a small equity to please him being that he no longer needs to do anything.
I was involved in a similar situation and my attorney talked it over with my cofounder and I parted ways amicably by giving her 5% for her 6 months with the company.
I was thinking of giving him 5% then diluting him down to nothing, but have him also sign over the rights to sue me for anything that happened prior
+1
If the company is never going to be huge, you can just give him 10% or whatever and never pay any dividends.
Literally worst advice on sa.com ever
Wow, I’m honored.
You can’t have people do work for a company for free….otherwise they can make a claim they they own part of the company….regardless of whatever legal docs were signed.
Common mistake and a great lawyer can fix.
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