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Partnership Litigation

There is no need for any “contract” because this is between people who trust one another, right?

Did a business venture with a loved one turn into a legal nightmare? Without a proper contract, the fallout can be devastating.

More often than not, this silent partner or investor is anxious about the money if your idea is not immediately successful. It is often the case that projects that start around the kitchen table or over lunch simply are not well thought out. It sometimes takes years for a great idea to become successful or worse, it never becomes successful and the project fails.

You probably invested your own money and substantial time into your project that did not go anywhere.  Many investors get very angry when they lose all of their investment in your project. They start to look around at who to blame. That 'someone' will be you.

What can an angry partner do to me?

Once this angry partner seeks out legal counsel, you might get a “demand letter” demanding a return of the invested money by a specific date. The demand will specify the issues that your former friend or angry relative believes happened; i.e., he or she was lied to and the funds were misused by you.

What to do now?

Well, if you are smart, you realize that this can get much worse. In fact, if certain issues have not been done by you BEFORE you accepted the funds, you could be looking at the sale of unexempt, unregistered securities. This is a terrible legal position to be in and could subject you to criminal prosecution or at the least, regulatory prosecution by the Texas Securities Board, or worse, the U.S. Securities & Exchange Commission if your friend or relative lives out of Texas. This situation can render your defenses moot since the securities laws hold the seller (the one with the business plan) to strict liability of statutory compliance. That means that a failure to comply with such renders an attempt to be fair and honest in your relationship fairly meaningless. Simply put, the failure to comply with the mandates of securities laws means that the business relationship you set into place will probably fall through and you will be liable to your “silent” partner for damages. Most of the time, that means the return on their full investment, their attorneys’ fees, and statutory interest.

Just file bankruptcy? Think again. Often, securities fraud is not dischargeable in bankruptcy.

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Whatever your legal needs might be, the Spencer Law Firm are experts in the field of law. Contact us for a free consultation.

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