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Can either my co-founder or I move forward with our potential startup without the other?
Anonymous3 views3 answers
A friend and I have been planning to start a business together for over 2 years. We have both put many, many hours of work into developing the product and the business plan. However, I now suspect that we do not make good business partners. Are we obligated to each other to do this together or not at all? What legal position do either of us have that would prevent the other from going off on his/her own to form the LLC and develop the business that is a product of both of our imaginations and hard work? There hasn't been very much money spent on the business to this point; it's been mostly development work.
It sounds like you have an oral partnership which was supposed to ripen into an LLC. That would mean that each of you has a "fiduciary duty" to the other, and to the existing partnership, and that also presumably means that each of you owns 1/2 of he development so far.
Talk it out, and see if you can stay partners or if you need to divide the partnership assets and go your separate ways.
Ms. Koslyn gives great analysis. One possibility in the event of impasse is mediation. Mediaition is a non-binding procedure to seek a win-win scenario instead of litigation or arbitration which are inherently win-lose.
Under the facts you present, presumably you both own the intellectual property (copyrights, etc.) as tenants in common. This means each person is a 50% owner of the intellectual property. Your question does not state what type of innovation you have developed, but assuming there are copyright issues involved, and you don't reach a mutual understanding, each of you would have a non-exclusive license to the copyrights, meaning that each partner may freely use or license the copyright, except, each partner must keep proper an accounting records, and allocate 50% of the profits from the copyrights to the other partner, AND, no partner may grant an exclusive license to anyone without the consent of the other partner.
In summary, co-ownership of the intellectual property is not a desired result. The best outcome would be for one partner to "buyout" the other, and sign a written contract which clearly states, for example, Partner A has relinquished all intellectual property rights in the business.
