Broken Arrow, OK asked in Business Formation, Business Law, Civil Litigation and Contracts for Oklahoma

Q: If an investor contributes more than an owner do they automatically own part of the business and right to make decisions

The investor was treated as an owner but was not officially because they were worried it would affect their food stamps/unemployment (they were employed also). The business does not have an operating agreement and the investor dissolved the business without my signature. They withdrew all the business funds (~3,800 in joint personal account) and demanded I auction off assets. I wanted to sell the assets before dissolving. They cancelled $500 in orders so I wouldn't receive profit for my contributions. They filed a lawsuit saying that my other business is selling these assets (not true) so they are suing me and my other business for the remaining assets which I am in possession of. They wanted to buy the business from me for a lowball offer but got vengeful when I declined. They said the offer was based on the current worth of $4000 after declining they want to sue for $10,000 in assets (company has maybe $5000) after they drained the account. She is now claiming that she is an owner.

1 Lawyer Answer

A: Unless otherwise agreed in writing, the larger amount of money invested in a business by an investor does not mean the investor "automatically owns part of the business." However, you are throwing legal terms around without fully explaining all the important details underlying this unusual situation.

For example, unless there is some sort of investment or loan agreement between the "investor" and the business, the "investor" is NOT an "owner." Nor is an investor an employee or agent of the business--unless both parties agree.

On the other hand there are other ways for an investor to establish his status as an owner, such as being treated like an owner in all material respects over the life of the relationship. Your facts sound like this may have happened--at least in the investor's mind. Bottom line: Unless you want to lose the lawsuit, you need to hire a litigation lawyer.

Justia Ask a Lawyer is a forum for consumers to get answers to basic legal questions. Any information sent through Justia Ask a Lawyer is not secure and is done so on a non-confidential basis only.

The use of this website to ask questions or receive answers does not create an attorney–client relationship between you and Justia, or between you and any attorney who receives your information or responds to your questions, nor is it intended to create such a relationship. Additionally, no responses on this forum constitute legal advice, which must be tailored to the specific circumstances of each case. You should not act upon information provided in Justia Ask a Lawyer without seeking professional counsel from an attorney admitted or authorized to practice in your jurisdiction. Justia assumes no responsibility to any person who relies on information contained on or received through this site and disclaims all liability in respect to such information.

Justia cannot guarantee that the information on this website (including any legal information provided by an attorney through this service) is accurate, complete, or up-to-date. While we intend to make every attempt to keep the information on this site current, the owners of and contributors to this site make no claims, promises or guarantees about the accuracy, completeness or adequacy of the information contained in or linked to from this site.