Parting Ways In A Business

Is it legal to start a business compete with partner?

It depends on what’s in your partnership agreement. That you’re asking the question makes me think you’ve omitted that item in your partnership agreement, if you even have one at all.If there’s nothing in your partnership agreement or contracts you’ve formed with your partner that binds you, like a non-compete clause, then there’s nothing to stop you from competing. You mentioned rewriting all the source code from scratch in a different programming language. I’d still be cautious. If I read the English version of “Hunger Games”, then decided to rewrite the entire thing in Swahili, that doesn’t make it original or my work. It’s still stealing.You might ask yourself how you might differentiate your new product from the old product. What features can you add to enhance what you’re offering? This is going to help you pull ahead in the competition, so you’ll want to do that anyway. How can you give your product a different look and feel? Not just on the outside, such as a new cover to the “Hunger Games” book, but rather a new way of experiencing the program.The other matter is in regards to ethics. What’s legal isn’t always ethical. For example, if you both are working on the same project and nothing has been official (business isn’t registered, you’ve kept under wraps, you’re both contributing, but have no legal agreement), you might be just parting ways, every business person for themselves. You may or may not have any legal issues. However, is it ethical to hijack a team project and lay claim to it, like in the movie “The Social Network?”By the way, I’m not a lawyer. None of what I’ve said above should be taken as legal advice.Business Coach & ConsultantBackbone Americabackboneamerica.com

What is the fair way of parting ways in a startup before seed?

The one who quits should probably sign (or affirm, if already in place) an agreement assigning all of their work product, intellectual property, and business opportunities, to the company.  If you've got a vesting program in place then follow that, unless it leads to an untenable result.  If not?  Typical vesting is 48 months, you can give the founders the benefit of no cliff.  So one proposal is that they should keep either 3/(48+48) of the stock of the company.  That's only 3%, but that's probably fair.  There's a school of thought that someone who quits early shouldn't keep anything, they just get their money back.  They're the one that's quitting.  You're going to need to find another founder, or hire someone, and to make it work you'll be in it for years, not months.  If they demanded half the company it's not worth it for you to continue - you'd be doing 100% of the work for 50% of the reward.The three best ways to handle mutual investments by founders are: (1) pay back their contribution when they leave, if you can, (2) carry it as a debt that the company will pay back if and when it has the funds through income, liquidity, or a large outside investment, possibly with periodic payments until then -- if you've contributed to your debt should be entitled to the same treatment, or (3) treat each founder's contribution as a stock purchase, at an agreed-to price.I'm assuming they're quitting because they've given up on the business, and don't mean to pursue it for themselves.  If they want to walk away with business assets, rights to the intellectual property or work in progress, or an intent to compete in your market, you'll have to work through these things.  If it's for personal or financial reasons, and they still believe in the company and want to help it succeed, you can consider moving them to an advisory role, consulting, something like that, and work things out accordingly.

What should I look out for parting ways pre-incorporation?

I'd say that you'd probably be better off finding another cofounder who is solely committed to the business.1. Find more customers on your own. Tell the existing customers that your previous cofounder was unable to fully commit to the idea, so you will be continuing on your own. Tell them that this will lead to better customer service and that you look forward to "serving" them in the future. If your software is truly improving their business, they aren't going to abandon it simply because you aren't working with their friend anymore.2. This depends on what documents you have signed. Have you signed a non-compete agreement? Does he officially own any part of the business.3. You shouldn't be worried about it unless he is the originator of the idea and told you about it only after you signed an NDA. The only other reason their should be an IP issue is if you signed some sort of IP assignment agreement. If you wrote all of the code, it's yours.4. The best way is to simply out perform him. You have a significant head start and more time to work towards the business. You could also file a (provisional) patent if it is patentable. You could try to get him to sign a noncompete, but I doubt he would.

Should Pixar part ways with Disney?

Realistically…Disney are perfectly capable of producing their own CGI animated hits without Pixar anymore.Wreck it Ralph, Frozen, Moana, Big Hero 6, Zootopia, Tangled, Bolt, Chicken Little, Meet the Robinsons and Dinosaur are all Disney Animated Studios films - not Pixar films… and I think we all know how well received Tangled, Zootopia, Big Hero 6, Frozen and Moana were.But should the two part?No.With the new Disney Parks developments underway including the Disney’s California Adventure overhaul and the new Toy Story Land as well as existing attractions such as Buzz Lightyear’s Space Ranger Spin, Toy Story Midway Mania, Finding Nemo the Musical, Finding Nemo Submarine Voyage etc. etc., Disney needs Pixar.Plus, I doubt films like Finding Dory, Toy Story 3 etc. would have been the same without Disney involvement.What are the positives of Pixar breaking away from Disney? Why is this a good idea in the first place?Well… as of 2013, “Pixar films account for 12 percent of Disney's lifetime box-office revenue” according to Box Office Mojo.Whilst this may not seem like a lot, take into consideration DVD sales, merchandise like toys etc.There really isn’t a positive to losing Pixar.

How can I get rid of my narcissist business partner without harming myself or my business?

This sounds like a critical situation. I would suggest reaching out to a lawyer who specializes in exit planning for businesses. When you start a company you usually have a business plan where you outline the strategies and niche market that you serve etc. But a fundamental portion of that plan is your or the two of you's exit strategy. This outlines best case scenarios and worse case scenarios that will lead to closing or buying the other partner out, selling the company etc. I would air on the side of caution of diagnosing your partner but instead site the irrevocable issues and loss of business relationships as your reason for parting ways.Another document you should have in your records is your articles of operation or organization. I have an LLC that includes my ownership and my equity (money I have invested) in the business. This is something you have to be clear on and where the lawyer can go into depth. If she does not share ownership with you in this agreement and there is no formal amendment to that, technically she is not a partner in ownership. Again, I am not a lawer and do not represent myself to be. A lawer will also be able to clarify how separate yourself from her. I don't think too many lawyers would respond to this question on such a public forum. Call some local firms or ask other business owners for referrals.

I was completely screwed by my business partners. They raised millions of dollars and stabbed me in the back in the process. What can I do to prevent myself from being screwed in the future?

Let me start with a story about one of the co-founders of my company..."Dan", not his real name, came with great credentials.  He was smart and he had accomplished a lot.  His was a name that investors would respect.  Dan was also independently wealthy.  One more thing about Dan: he was unbelievably paranoid about being screwed over.Everywhere, Dan saw ghosts:Why are we only getting x percent ownership?  Why are we raising so much money?Why is this person getting so much stock?Why are we using gmail as our email client?On and on it went.  The questions seem reasonable, but his paranoid delivery conveyed a different message:  Dan was going to be impossible to work with.I eventually let Dan go because, despite his skills, he was too disruptive.The bottom line is don't be Dan.Back to your question...You should review the contracts and documents thoroughly with a good Attorney.  Having said that, there is always a way to screw someone over.  The smartest thing you can do is work with people you trust.  That is your best defense.  Once you agree to work together do just that: work together and forget about all the paranoid stuff.