I’m curious to the possible negative outcomes to creating a partnership between one other person and giving him a 65 ownership while I get 35

UPDATED: Sep 30, 2022

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I’m curious to the possible negative outcomes to creating a partnership between one other person and giving him a 65 ownership while I get 35

I’m starting an online company in relation to the
video game industry. My partner won’t go lower
then 65 ownership. I want it to be 50/50, but I
think working with him is a good idea for the
company. What is the downside to accepting
these terms ? The company intentity is an LLC.

Asked on July 10, 2016 under Business Law, California


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 6 years ago | Contributor

Here's the downside: he will control the company as majority owner. If you set up an LLC (not corporation), you can mitigate or reduce his level of control with a properly draft operating agreement that protects your interests, but as majority owner, he will still be able to exercise unilteral power that you cannot, and the default (in the absence of a properly drafted operating agreement) is that he will have complete and sole control over the business: can decide to sell it, to close it down, to take it in a direction you don't want, to license its technology or intellectual property out or pay for licenses in, control the finances, etc. You will not be partners: he will be your boss. 
I have seen (and been part of) a number of unequal-ownership 2 or 3 person companies, and in all cases, the majority owner controls the company. If you don't want to not have a say in your own business, don't do this.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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