How legally binding is a pre-incorporated agreement?


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Our startup was founded by 3 people and is in it's final stages of development. One of the founders wants to pull out but keep their 33%.

We have a one page document signed by the three of us stating that the company will be divided equally 3 ways.

Up to this point the other two of us have done 100% of the work and have paid for 100% of the costs. The contribution of the third person was supposed to come later. Now that they want to pull out we are trying to decide if they have any legal precedent.

The website is not yet incorporated. Is there any legal binding when three people agree to split a company which hasn't been created yet?

Equity Legal

asked Mar 30 '13 at 20:41
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Rangerrick337
13 points

1 Answer


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Yes, it can be legally binding. It doesn't matter whether your company has been created.

Your best option is to bargain with the leaving founder to give him something small that you can live with.

You could argue that he didn't live up to his part of the agreement by leaving and draft a new agreement for the two of you and leave him out entirely. This creates a risk that he will sue you in the future if your company is ever worth anything.

Of course, you should hire an attorney to help you, but that costs money that you probably don't have...

answered Mar 31 '13 at 03:47
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Kekito
1,936 points
  • Yup, attorney costs are prohibitive at this point. A serious discussion will definitely be happening, but I want to be as well versed in his legal options as possible. I wish lawyers weren't needed but I guess that's what they're there for. – Rangerrick337 7 years ago

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