Legal Question in Business Law in California

Co-owners, directors and top officers of corporations have a duty of loyalty to the corporation and to their co-owners. Among other things, they cannot take advantage of business opportunities that are clearly within the scope of the established business the co-own, and run off and start a wholly-owned business to grab those opportunities, to the detriment of their co-owners and the business.

Your co-owner or co-promoter at the existing business is cheating the business and you. He is breaching a so-called "fiduciary duty" by misappropriating business opportunities, and there is a well-established foundation of statutory and case law that would allow you and/or the current business to sue the pants off this individual.

However, you probably don't have and couldn't claim ownership rights in the new business. It is within the realm of possibility that an out-of-court settlement might result in that, but your legal action (probably, at least) is for you (or you and the corporation) to sue, individually and derivatively (on behalf of the corporation) for damages.

This is an unfortunate mess, since suits berween co-owners, although sometimes necessary, are huge distractions and in a two-person business can be quite destructive. However, your "partner" (not really a partner; your business isn't a partnership) is cheating and you should blow the whistle sooner rather than later. Ler me know if I can help.