Can I fire a partner who isn't yet legally a partner?

Question

Sounds simple enough, but i wanted to get my facts straight. I've started a business (an S Corp.) under my name and have paid all the appropriate fees thus far. Recently, I took on a partner by making a verbal agreement to be partners. I'm already seeing issues with this individual and I'm not interested in keeping him on board. Seeing as how no paperwork (except for an NDA) has been signed- can I just tell him that he's out? Or do I have to worry about further ramifications down the road.

(And yes, I know, use better judgment, next time.) :)

Answer 1

You have no legal obligation to him.  Just break it off quickly and don't don't take advantage.  Good luck.

Answer 2

May depend on how long the partnership has been running and if it would appear to an outsider if there has been a partnership between the two of you. If you verbally agreed an equal partnership he may think of you the same as you think of him. How much time, money, contribution has he made to the business?

You call him a partner in your opening question. You cannot 'fire' a partner, you must dissolve the partnership, if in fact there is one.

maybe you should consult a lawyer to make sure, as you say, you have your facts right. Otherwise you could have problems.

Answer 3

You have a corporation -- not a partnership!  Ergo, you don't have a partner.  If you sold or gave him stock you have a second stockholder.  If you gave him a title you have an employee who may be a corporate officer.

The important point is that you have an employee.  If you do not have a contract with the employee he/she is serving at your pleasure and you may discharge the employee whenever you so desire.

The first question is: Do you have a contract, written or verbal with your employee?

If you have a written contract you are bound by it and should honor it.

If you have an oral contract you could have a problem.  Even if you and your employee are men of good will each will have his own perception of the agreement.

Regardless of what your agreement is and regardless of whether it is written or oral your soon to be ex-employee can sue you.  It doesn't matter if the suit has merit or not.  If he feels slighted and wants to get even he can sue.

I suggest that you retain a lawyer.

Hope this helps

Jerry-the-bookkeeper

Answer 4

You created a corporation ("S" Corp) with you owning all the stock before he entered the picture.  You're the owner of the corporation.  There's no partnership unless you've taken steps to create a formal partnership between the corporation and him.  He's an employee of the corporation at this point, UNLESS you gave him shares in the corp.  

Talk to your lawyer, but I don't think you have any obligation to him.