Corporate Law shareholder never paid to buy in

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mwilkins

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I was a sole prop. and had offer by a family friend to buy in and incorp. I had 15,000.00 invested , a work truck, and large amount of equipment and tools . He said he would match money investment and buy a truck also. We went to a local attorney and he drew up incorp. papers, when he asked about share investment we told him we were still working on figures, so he drew up 1000 $1 shares and wrote that 100 were paid in. 1 year and alot of meetings and descussions later he hasn't come through with agreement. He has not invested one personal $ bill or one $'s worth of equipment or tools. He is now demanding i buy him out at $52,000.00. He quit coming to work and has started another job with a competitor. How do i go about buying the other 900 shares legally...HELP.
 
You need to talk to an attorney familiar with the laws of your state and who can discuss the specific facts with you. Facts may include - who are the directors, who are the officers, what record do you have of his agreement to contribute cash and a truck, did your own assets ever get formally transferred to the new corporation, etc... Advice without the facts will be worthless at best and misleading or erroneous at worst.

It sounds like the other 900 shares are really not the issue. One issue is whether the consideration to be paid for the shares was ever received (you say his obligation was to match the money invested and to buy a truck, but it sounds like the corporate records are different). If the consideration was not paid, depending on your state law, he may still own his shares but the corporation would have an action against him for the balance due. This can all get very complicated and you need good legal advice before you proceed another step.

Unfortunately, skipping the legal details in order to get a business off the ground quickly almost always has consequences down the line. I always alert clients to the need for a buy-sell agreement from the outset but many of them choose to forge ahead with misguided notion that there will always be time to do it later. Often, later is too late...

Good luck in working this out.
 
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