Legal Question in Business Law in California

Re: investing

Mr. Stone's answer is "right on;" that's what I'd do too. Your business arrangement, despite its informality, would almost certainly be ruled a general partnership rather than a series of loans, so each of you have all the attendant personal liability problems. Further, the facts show a lack of cohesion among the partners and a lack of professionalism (no contract!!!).

Actually, withdrawing from a partnership and getting exactly 100% of your capital contribution back is not necessarily the law, although that little problem wouldn't deter me from trying. A partner has the power to withdraw at any time, but he may not have the right to do so. Thus, we have "rightful" and "wrongful" withdrawals. If a withdrawal is rightful, the withdrawing partner is entitled to be paid his share (here, I suppose one-eleventh) of the partnership's net capital. This is probably less than $5,500, but maybe more, depending upon whether the net worth has increased or decreased since the investment(s) were made.

A wrongfully-withdrawing partner is also entitled to be bought out on the same basis, but minus damages sustained by the partnership due to his withdrawal (if any).

In your case, I think the withdrawals of the non-contributors arguably would be rightful, since they are being abused by capital calls and the threat of expulsion.

By the way, expulsion of a partner requires a unanimous vote of the other partners or judicial action.

All of these topics are covered, and much more, in the Uniform Partnership Act of 1994, codified as Corporations Code sections 16100 to about 16810 or so, and I suggest you obtain a copy and also self-help law books on (1) how to form and operate a partnership and (2) how to file and win a small claims suit.

Re: investing

CAN he do it? If you let him away with it, sure. You're now learning why money issues need to be properly documented in an enforceable contract, but of course, no one wants to spend the money to have a big bad attorney do it right in the beginning. You probably are going to need to spend money on an attorney now to threaten suit, and get a useful agreement documented after the fact. Feel free to contact me if you decide to do this right, now.

Re: investing

Part 2:

BTW, such investment proposal is in complete disregard of the securities and investment laws, which require full documentation of the investment, etc, etc. But, all that gets you now is an additional legal basis for your lawsuit and recovery. Contact me when you're ready.

Re: investing

First of all, you need to get OUT. A partnership between two people is madness, let alone eleven. What if you don't have enough insurance and there is an injury? Each of you is liable for all the debts and liabilities. If I were you five, I would have each of you sue in small claims court (against all the others) for $5500 each. Since I can only advise one of you, psst! Go to small claims court first and don't tell the others, that way you would be first in line to get a judgment while there is possibly still some money left.