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| Business Ownership Dilemma |
Question:
I have a complex business
problem I would hope to get a little
advice on.
More than a decade ago, a family relative
asked me to put a business in my name
on behalf of him due to substantial
tax problems he was having. It
was a wholesale small manufacturing
type business. I agreed. During
this time, he primarily developed
the items. No copyright or other
type of legal filings for "ownership"
of these items ever took place. During
this time, I started to retail this
item. Then, when he had a busy
period, I helped him out and he showed
me how to make these items. My
retailing of these products had become
very successful. I eventually
have become dependent on the sale
of these items. I continued
to assist him sporadically through
several years when he needed help
filling my "orders".
Last year, we had a major blowout
when he became verbally abusive (he
is an alcoholic) towards me in front
of a business associate of mine. Simultaneously,
he had shifted the focus of his wholesale
items and focused nearly all of his
attention on a new product that was
far more profitable from him. By
default, my needs to fill my "orders"
to satisfy my retail customers were
being neglected. I assisted
as much as I could to satisfy myself
(it still wasn't enough), despite
being mistreated, but eventually
the burden of dealing with someone
who had started being abusive became
too much and I decided to stop with
the assistance
We came up with a plan that he verbally
agreed to where he would hire employees
to fill my "orders". He
failed to do that, continued to focus
on his new glamorous product, and
only filled maybe a third of my orders.
My retail business
has suffered quite a bit because of
this. I tried to "negotiate"
with him, even though I own his company,
out of respect. I suggested
that I make the products I need elsewhere
(I even offered a royalty), he rejected
it and would not come up with any
alternative plan, except to say "you'll
get more". As a businessman,
I couldn't rely on that as a sound
business
plan & had to do something to
survive. So, since there was
no one else in the marketplace making
this product except him, I rented
a workspace, set up & began to
make the product myself. I told
him I was doing this. Initially, he
seemed to grudgingly accept it, but
when he got word that I actually had
done it (instead of talking about
it), he got irrationally angry. He
changed the locks on the building
that the business
rents, to keep me out, even though
I am the "tenant" and signer
of the lease. He has called
me a thief. Amongst other far
more negative things.
My position is he abandoned my retail
business
by failing to live up to an agreement
we had and failing to accept or try
to come up with any solutions. In
addition, he personally, the wholesale
business
I own that he's managed, nor I, own
anything legally that states these
products are owned by anyone. Anyone
could make this product. He
has demanded I stop with my production
("I didn't get his permission"),
has contacted local media trying to
smear my name & has declared that
he has a new workspace hundreds of
miles away where he plans
to continue to supply me. I
feel he is acting at a minimum angrily,
but really more irrationally. As
I am legally responsible for this
corporation, I am very concerned &
would really like to get this business
out of my name. I have suggested
this to him. He has not responded
to this suggestion, because if ownership
is transferred to him, the govt will
likely seize it to satisfy his enormous
debt.
How do I get out of this mess, and
did I act reasonably? Any comments
would be greatly appreciated.
Answer:
You have a real mess
on your hands and bad advice from
strangers may not be much help. Go
talk with a lawyer. Be prepared to
prove that you own the business.
Be prepared for possible legal problems
with the tax authorities and your
brother.
What was put in your name? A
corporation? LLC? If it's
a proprietorship, what exactly was
put in your name? What state
are you in?
You probably have the right to manufacture.
You probably have the right
to buy from another manufacturer.
But there is a problem with
manufacturing on your own while at
the same time being an officer or
trustee of a competing business which
you are holding title to for the relative.
It will be important to disassociate
yourself from you relative's business
before you compete with it.
Dave M is right, you need to see an
attorney. If you can sort out
the facts for me, I can tell you what
the law is and advise on what to do,
but these facts are so complicated
that it would be much more efficient
if you were talking face to face with
a business
attorney who could ask you a zillion
questions.
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