Two guys, best friends. Went into a “partnership” together.
3 years later, guy #1 is getting a divorce and is neglecting the business. Guy #2 has had enough of carrying on by himself, and is worried about what the soon to be ex-wife will take and wants to divorce himself from the partnership.
But there was no partnership agreement. “We never got around to signing it.”
Dumb dumb move.
So basically guy #2 has “gifted” guy #1 over $300,000.00 with no ownership interest in any of the assets, no partnership, no documented loan, no paperwork at all.
And no way to get any of his money back (absent a costly lawsuit against a guy who may have nothing to give).
Learn from his mistakes. There were two big ones. Can you name them?
Without the agreement, there’s nothing to prove what percentage guy #1 really owns. You can’t just assume 50/50 because there are all kinds of different scenarios where someone may take a larger percentage because of a larger capital investment. With this not specified, the wife’s divorce lawyer will try to stake a claim in 100% of the business assets.
Another issue is there was no way guy #2 could buy out guy #1 since #1 wasn’t pulling his weight. In addition, it would have been a way for #2 to keep the business going if he bought out #1 because of his marital problems.
His first mistake was going into business with a friend.
The emotional stuff keeps you from making the hard, rational business decisions. Thus he never could bring himself to “insist” to his friend that they have a partnership agreement…
…which was mistake #2: not having a written, executed partnership agreement.
There is a great line : "Never start or do a partnership with your friends, you can lost your friendship and business also at a particular moment.