AboutTimmy Chou Expertise I am a experienced Mediator and a partner in a management consulting firm. As a mediator I work as a third-party neutral and specialize in partnership/shareholder disputes, management/labor issues, company culture difficulties, and family-owned business problems. I can help describe why alternative dispute resolution may be a good choice for you. As an experienced management consultant I may be able to offer creative ideas to help resolve your organizational and business problems and disputes. "If you say conflict, I say opportunity".
Question Approx two years ago I started a business with my best friend, of course with all the caveats about partnering with friends. Should have listened. Or, I should have thought through whether I could work full time and also do the business.
We developed an LLC and acquired a business loan and a credit card. We renovated our rented space, purchased equipment, inventory, etc. for the business and spent the initial $32,000 businesss loan and maxed out $2500 on the credit card. I worked the business as a part-time manager on evenings and weekends, about 20 hrs a week. I had a full time job. My partner worked only the business. She worked days and weekends and pretty much ran the business. After six months, I realized that the business was likely not going to make enough money, even eventually, to support my quitting my full time job as I had hoped. It was taking a toll on me and family so I told my partner I no longer wanted to be in the business. She did not desire to sell the equipment or inventory to dissolve the business and recoup any costs to pay off the business loan. She wanted to keep the business going but was unable to take on the full amount of the business loan on her credit only. I left my name on the loan in order to give her time to find a co-signor or some other arrangement.
It has been 2 yrs now and we are finally dissolving the business. I need my name taken off the loan because she's having a hard time paying the bills and I'm afraid its going to effect my very good credit.
I have never taken any income from the business whatsoever. Anything the business made went back into the business or to her. I only worked part-time the first six months and none since then. Now that we must resolve this, she is asking me to pay half of the original debt of the business loan and credit card that were incurred during my six months there (approx $17,000). I told her I didn't think I should have to repay this amount because I essentially gave her the business after getting it going and that the business should pay for itself. Or, we should sell it, recoup anything we can and pay off what we can from the loan.
??? What might I be responsible for if I never received any income, she ran the business and she would now retain all of the equipement and possibly even sell the business idea for profit at some point?
Answer Thank you for your question!
Mediators act as neutral third parties to disputes and never "get involved" in judging the merits of conflict, but merely use special techniques to help the parties decide how to negotiate their own settlement.
I am not a lawyer and cannot mediate this with you alone but I can respond to your question from my business consulting experience.
Note that this issue may have legal consequences and you may wish to consult an attorney.
The bottom line depends on wether or not you have signed as a guarantor on the loan and credit card. If you and your partner are both guarantors you are both on the hook for the note. If one or both decide not to pay, both your credit files will be impacted.
If you have not guaranteed, you can choose to pay or not. Her only recourse would be to sue you if she disagreed.
My opinion here is that you are being unfairly asked to pay debts of a concern that is only benefiting someone else.
These are some ideas. Feel free to follow up with additional questions.
For your information, the pros and cons of the types of dispute resolution methods follows.
GOOD LUCK!
Arbitration, Mediation, and Litigation
Arbitration: the referral of a dispute to one or more impartial persons for final and binding determination outside of the judicial system
Benefits of Arbitration:
Confidential, no public record
Limited exchange of documentation, information
Quick, don't have to wait for a court date
Arbitrators have expertise in the subject matter and are trained in conflict resolution
Cheaper than litigation
Preserves business relationships
Negatives of Arbitration
It's a compromise, no 0 winner
Complex arbitration can be costly
If not satisfied, may litigate the arbitration procedure
Poor results with an unskilled arbitrator
Both parties must agree to cooperate in the process
Mediation: the process by which parties submit their dispute to a neutral third party (the mediator) who works with the parties to reach a settlement of their dispute.
Benefits of Mediation:
Neutral mediator can objectively suggest alternatives not considered
before
Parties are directly engaged in negotiating the settlement
Can be quicker than litigation
Less costly than litigation
Preserves business relationships
85 of American Arbitration Association cases mediated find successful solutions
Negatives of Mediation
may not reach a binding decision
unskilled mediator
Litigation: using the judicial system to resolve disputes
Benefits of litigation:
a clear winner and loser
uses a prescribed set of procedures
more predictable outcomes
is final
Negatives of Litigation:
waiting for court dates can do more harm
usually more expensive than mediation and arbitration
part of the public record
