I started a small start up business. $38,000 initial investment. Was introduced to a potential partner. She had no monetary investment or funds for improvements when the agreement was set. We mutually agreed to both work until we reached our break even point. 17 months into the business I am still investing my own personal funds to continue essential growth. She decided one day she was done. No notice. And left the business. Still $24,000 in out standing debt for the company. She was never legally added to the secretary of state as a partner, due to her extensive bad credit history. From day one she represented herself as co-owner. News paper articles note her as co-owner.
She is now claiming she was a employee who was never paid for 17 months.
Will the verbal agreement with a witness have grounds to prove she was not ever an employee?
Partnerships do not require a written instrument to be effective, but, as you can see, it is always nice to have something to point back to. It sounds like you have some evidence that the two of you were partners, and it sounds like she held herself out as a partner. You might start by having a lawyer write her a letter explaining to her why she is not entitled to any money and outline why she does not qualify as an employee.
It is unclear whether you are talking about a partnership or an LLC, and the distinction may be significant as to whether she is a member or partner of the entity. In theory, an oral agreement may be enforceable, but the problem always is one of proving the existence and material terms of the agreement. You should consult with a Montana Business Attorney to assess your situation and options.
Partnership agreements are not listed in the statute of frauds (which require certain contracts to be in writing). However, being able to get this story into evidence without violating the hearsay rule will likely take a lawyer's help.
