Forums: Discussions for entrepreneurs and small business.

Hey Fellow Sunnies,
I have a dilema that perhaps someone out there can help me out with. My question is as follows: How do you get rid of a non-responsive, irresponsible member of your corporation (board of directors). How do you fire, a board member and what are the legalities to do so?
What if the so called board member owns 20% of your corporation? But he isn`t putting in his 20% (time, cash, etc.) How do you give that person the boot? is it easier to dissolve and start a new corp? or as 80% owner I decide who stays and who goes?
Please help any advise would helpful at this point.


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Edgar Monroy
Web Developer / Owner / Consultant
When starting your own business the need to "know-how" is greater than money!
http://www.nuevolution.net

You have a board of directors?

Board members typically don`t do much. Or is this some kind of partner? I guess I completely don`t understand what is going on, or why you would have a board.

To answer your question, board members don`t normally have a stake in the company, and they are voted out by the other board members.

Do you have governing documents or a partnership agreement that deals with this situation? If so, follow the procedure outlined therein.

If not ... you might be in a tough spot.

No, NO governing document, he does own 20% of the company which was given to him by me as a "token of appreciation" But as far as him being one of the owner as to say he started the business out with me, or he dished out money to get the business going "NO".. I had already been in business 4 years prior to that.
As I`ve said here on the forum I started my business with $250.00 and turned it to a profitable / established business. What`s funny about this situation is that he doesn`t do nothing, he says he`s 20% owner, but he won`t dish out the cash that he owes. The Original agreement was that he took care of some small fees for the company about $80.00 bucks a month to be exact. He`s never even paid $1.00 dollar to his commitment. But yet wants to write it off on as his expense.
See where Im getting at?
NIKOLE, that`s what I thought! they only sit there and do nothing.


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Edgar Monroy
Web Developer / Owner / Consultant
When starting your own business the need to "know-how" is greater than money!
http://www.nuevolution.net

If you gave him 20%, you then need to buy back your 20%.

And not do that in the future.

What does 20% get him? Are you handing over 20% of profits?

Can I have 20%?  :)

Steve, I`ll send you 20% of my company ... just for being such a nice guy.

Here, I think I have 2 dimes in my pocket right now. What`s your address? Or would you like your $0.20 to come by check?

No, No, No it`s not like that.
We went to college together and seeing that he was struggling(making ends meet), So as a long time friend not any dweeb of the street either, we went through alot in college. I decided that I would give him a percentage in return for his expertise and for a small amount of cash(investment), and a mutual aggreement that he would run a certain part of the business. Which he never stepped up to his responsabilities.


So I guess the only way is to buy him out huh? $600.00 bucks is nothing comparing to what I can loose in the long run.. Thanks guys...


-------------------------

Edgar Monroy
Web Developer / Owner / Consultant
When starting your own business the need to "know-how" is greater than money!
http://www.nuevolution.net

     I`m no attorney...but you might need one. 
     At first blush, I see two options.  One...have a candid conversation with your friend.  Explain your point of view and ask him to respond and what he`s looking for in the business relationship.  Best case scenario is that you two hammer this out and start meeting each other`s expectations.  Another option might be that he wants out also and you can negotiate an equitable separation.
     Second....I`d formalize your business structure.  I just used legal zoom to set up my LLC.  Whatever structure you choose, there`s no substitute for legal documents establishing the business, decisions and exit strategies. 
     It`s never pleasant for business ventures with friends to go sour...but it`s a lot more straightforward to deal with...and perhaps saves the friendship... if such things been established up front in a legal document.
     There`s an attorney in the SuN network who usually responds to legal questions with very solid advice.  If you don`t like the advice above, try posting again with a request for legal advice in the subject.  That might lure him in.
     Good luck!

If you can buy him out for $600, than I`d do it quick.  But I would probably consult an attorney first so there are no problems later.

Board of Directors do "do something".  In the real world, they challange the CEO/President as to the strategic decisions they are making.  But as you see in many large corps, they usually rubber stamp the CEO and their actions.

There is nothing wrong, especially for a young growing company to have what I would call a Board of Advisors.  Not Directors.  Find 4 - 5 successfull business people that you know and admire with varying skills (marketing, accounting, operations, etc) and preferably in different industries/ markets.  That way you get a nice cross section of knowledge and advice.

And don`t just pay them to be there.  They should want to help you.  If you want to reward them, come up with some token arrangement based on performance of the company over 3 - 4 years.  And certainly not 20% of the company.  And it`s OK to invite them out of the group if they don`t add value or constantly blow you off.

Hope this helps.