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

Bruce Alexander Minnick

Answered

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.

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