My business partner and I started a small company a few years ago. The problem is we never wrote down an operating agreement. Now we're disagreeing on who owns what. I put in more money to get us going and handled most of the early client work. He handled product development and has been running operations since. We're at a stalemate and it's starting to affect the business. Has anyone dealt with something similar? How did you sort out ownership after the fact?
Partnership
My business partner and I disagree on who should own what
The money contribution is usually the easier one to trace. Do you have bank records or anything showing what each of you put in? Same with client work. If you can document that, it gives you a starting point for a conversation. Without a written agreement the default legal position in many places is equal ownership unless proven otherwise, but that varies.
Was there ever any informal split discussed? Even a text or email where you both agreed to something?
There's nothing written. We talked about it verbally in the beginning but it was vague. I checked my old emails and there's nothing concrete.
This is exactly why operating agreements exist. Not trying to be harsh, just saying. At this point you probably need a neutral third party to help negotiate. A mediator or a business attorney can walk you both through what's fair and what the law says in your state. It's cheaper than litigating later.
I'd second the mediator idea. A lawyer will tell you your rights but might push you you toward a fight. A mediator is there to get you to an agreement. Sounds like you both still want the business to work, so that's a good sign.
What does 'running operations' mean in terms of hours and responsibility? If he's basically doing the day-to-day management and you're not, that has value. Ownership isn't just about who wrote the check. It's also about sweat equity.
Document everything you can right now. Bank statements, invoices, emails about client work, anything that shows who did what. Then sit down and try to agree on a fair valuation of each contribution. If you can't agree, bring in someone who can help you value it.
One thing to watch out for: if you can't resolve this, the business could stall or fail. The cost of not figuring it out is probably higher than whatever you'd pay a mediator or attorney. Just something to keep in mind when you're weighing options.
Also, check your state's default partnership rules. In some places, without a written agreement, profits are are split equally but it can get messy with capital contributions. A local small business development center might offer free or low-cost advice.
Do you two still get along well enough to have a calm conversation about this? That matters more than any legal technicality.
We can talk without yelling, but it's tense. I think we both feel like the other person is undervaluing what we brought. I'm going to look into a mediator and also pull together whatever records I can find.
That's a reasonable start. Just dont wait too long. The longer it drags, the more resentment builds and the harder it gets to reach an agreement.
If you do end up negotiating, consider a buy-sell agreement as part of tthe solution. It sets rules for how ownership can change in the future, so you don't end up back here again.