Legal Question in Business Law in Pennsylvania

Dividing Assets of a Defunct Business:

Due to irreconcilable differences, I've recently decided to step down as co-founder from an LLC that was jointly owned by another majority shareholder (we both owned 38%) and a private investor who was entitled to the remaining 24%. The reason for my leaving was due, in part, to my partner's lack of vision and inability to complete his tasks, which was impeding the development of our project. After asking him to step down, he decided that we should split ways: he maintaining ownership over the current company and I starting anew.

We're a pre-revenue startup, with little to show for the year or so that we've been at it, so the process of dividing what assets we do have has up until this point been amicable. Considering I've done the bulk of the work, I'm expected to retain nearly all tangibles associated with the project; however, my partner is laying claim to the name�not the business name, mind you, the project name (which is not registered).

Although he has owned the domain name for a number of years (he was using it for a previous company) we collectively agreed to use the name for our project. My objection to him keeping the name is that I, and a colleague, have spent many months taking that name from merely a word to turning it into the brand that now represents this project. A brand that is now recognized across the web, and one that is associated with my colleague and myself, as well as the vision of OUR project�not my partner's.

To arrive at my question, I'm curious how these facts might be viewed if this ended up going through mediation to try and resolve our grievances, and if the time and expense of such a process is truly worth it or if it would be best to cut ties with him as soon as possible and start the (lengthy) rebranding process? To give you an idea, I would roughly estimate it being a 3-6 month setback if we walked away without the name.

Any advice would be much appreciated.


Asked on 3/08/12, 8:30 pm

1 Answer from Attorneys
Scott Polsky

Sir or Madam: Though you provided lots of facts, there really is no way to answer your question. All of the assets of the company must be given a value, and you are entitled to 38% of the value of those assets. Unless your LLC operating agreement states who will receive which assets upon this situation, it will be up to the owners to negotiate who gets what. If they cannot agree, a judge will decide (unless your operating agreement has an arbitration clause). The fact that you did certain things to improve an asset does mean that you are necessarily entitled to it. Mediation may or may not be helpful, but it is not binding. It can take as little or as much time as the parties agree to. I recommend that you hire an attorney assist you with this difficult phase of your business. Feel free to contact me at 215-367-5110 to discuss your matter further.

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Answered on 3/09/12, 5:57 am


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