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Do you suspect your business partner is stealing money from the company’s
bank account? Are jobs you should be getting not being signed up and you
think are diverted somewhere else? Does it seem like your partner is taking
more than his fair share in expenses, perks or draws? Or maybe your partner
pulling his weight like you agreed when you first started out?
Don’t let these suspicions fester, infect and spread throughout your
whole company. It could be fatal. Unanswered questions and uncertainties
about improper spending, unjustified expenses, mismanagement and even
embezzlement need to be answered and addressed promptly. If they are not,
the distrust will wreak havoc on a business. In fact, it can be the beginning
of the end for an otherwise successful company. You need to act swiftly
and firmly to stop any disagreements, conflicts or fights between the
owners of your business as soon as possible.
In order to get control of any suspected wrongful acts your business partner,
or partners, may be up to, you need to know the law, what your rights
are and what obligations are imposed on business owners. If you are a
member of a Minnesota Limited Liability Company, a shareholder in a Minnesota
corporation, or a partner in a Minnesota business partnership, you have
significant rights that should be respected and honored. It doesn’t
matter if your small business is an s-corp, or if you hold shares in a
family-owned corporation or if you only own a small percentage of an LLC.
You still have rights!
You deserve, and the law insists, that your business partners are loyal
to you and your company. You should expect, and Minnesota law requires,
honesty and candor among small business owners. You have a right to be
kept informed about important things going on with your business. In many
instances, your business partners cannot have interests that directly
conflict with your company’s interests. Owners are to put the business
first and their personal interests second. You should be kept informed.
It does not matter if you only own 10% of the business, the law requires
the company’s vital financial information to be shared with you.
That means the partner who does the books and is the only one with access
to the business bank account, has to share certain important financial
information with you. All of this is true and applies if you have a Minnesota
small business corporation with less than 35 shareholders, to most LLCs
and almost all partnerships.
If you are a founding shareholder (or member of an LLC) and work for your
company as an employee, the protections provided to you can be even greater.
You may have rights that prevent the controlling owners from firing you.
You may have rights to receive distributions or draws just like the other
owners are getting. You may have a right to reasonably expect to keep
your job for the rest of your life. You may have rights to have the same
expenses paid as your partner. You may have rights to the same perks the
other shareholders get.
To find out for sure, you need to talk to an experienced Minnesota attorney
who helps people that are being treated unfairly by their business partners.
You need to talk to an attorney that helps small business owners have
a say in the way the business is ran. You need to talk to an attorney
that protects the rights of family members that own part of their family’s
business. You need to talk to an attorney who protects a business owner
from being treated unjustly while going through a divorce. You need to
talk to an attorney that helps frozen out owners get a fair price when
being bought out under a buy-sell agreement. You need to call MKT Law.
In a lot of cases, those who own most of the business, the controlling
majority owners, will abuse the power they have and unjustly treat the
owners with a smaller, non-controlling minority interest. It is not uncommon
to see a shareholder
frozen out of a closely-held corporation. This can involve restricting information,
taking away managing rights, not issuing distributions or limiting draws,
making unfavorable changes to an owner’s job, taking actions that
significantly effect rights without any notice or without any meetings
or input from others. A shareholder in a close-corporation or member of
an LLC without 50% is uniquely situated to be unfairly by oppressing their
ability to participate in the business and prejudicing their ability to
receive profits. Unfortunately, a business partner you once trusted, who
treated you fairly and was always honest, can become deceitful, self-interested
The business partner that has turned on you can strip your rights and harm
your investment into your business if you do not have enough voting power
to force changes and take control. The ways this can be accomplished are
innumerable and can involve taking actions without providing notice to
the other partners, members or shareholders via written actions and without
meetings, changing the rights provided by, or for the first time enacting
buy-sell agreements, shareholder control agreements and by amending the
company’s bylaws, imposing stock restrictions or altering operating
agreements. This can also be accompanied by not paying out dividends or
authorizing distributions, having others invest and become owners in a
way the decreases the rights of existing owners, stripping a member of
her management rights, requiring the resignation of a shareholder from
his position as an officer or director, changing how the price or value
of shares are calculated or putting in place procedures in an LLC for
triggering buyouts that are designed to effect one member or group of
members and that are not likely to affect others, among an infinite number
of other ways.
This can be caused by personality conflicts, by disagreements over the
control and direction or future of a company, and by pure and simple greed.
Or there may be evidence of a business partner cheating you, embezzling
from the company or taking “side jobs” for themselves that
should be performed by the business. If the trust you once had in your
business partner is gone, or if your fellow shareholder is no longer loyal
to you and your corporation, it is time to take action.
Do not let these issues infect and spread throughout your company by not
addressing them right away. Unresolved contentions between owners causes
instability within a business that can prove fatal to successful operations.
If this is happening to your business, you need legal assistance with
a dispute, you have come to the right place. At MKT Law, PLC, our St.
Paul and Minneapolis business law practice is dedicated to protecting
clients' ownership interests in their businesses. How? We take aggressive
action to protect their interests, and have developed a reputation for
aggressive and effective advocacy.