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I owned a business, had an office, employees, etc. I did this for 8 years. I was good to my employees and business was good while it lasted.

We hired a person about 2 years before closing - an older mature gentleman - to do IT work for us, who was also working on his own business but needed some part-time work to supplement his income. We became fast friends because of our common interests.

He asked me to invest in his business several times; I politely declined. His business was exploding at the time...he needed help. I thought he was a great guy, felt bad for his limited resources and would offer him lots of good advice but felt uneasy about giving up cash since I needed it for my own business.

At one point, my business was slowing down and his was gaining a lot of momentum. He came to me with a different idea...to share a FT employee with me so I could keep her and she could stay busy and, in exchange, I would get an equity stake in his business. He also agreed to a 24-month buyout clause because I was nervous about the state of affairs in my business. We drew up a contract and were good to go. I was happy that everyone was happy. Things went pretty well and I made sure we had lots of emails and a contract to protect us both.

The buyout clause stated that, if at anytime during the 24 months, I wanted out of the investment, he would pay me a lump-sum amount for every month the resource was provided.

Things steadily got slower with my business and 12 months after the contract was signed, I decided to close on my business. It was tough. I had to layoff employees, clean up the office, get rid of supplies and equipment. As part of this, I told him I wanted out of the contract which resulted in a buyout payment to me of $40k. I felt bad that I was abandoning him, but I hung in there as long as I could.

Keep in mind, his business is probably worth about $5m today but I still want nothing to do with it. As it was starting to grow for him and money became big, he changed and things were stressful. I decided I would just rather bail and say "good riddance" to him.

After telling him I wanted out, 30 days later he still hadn't said anything about re-payment, so I sent a follow-up email. He flipped out, ugly words were said and he came up with many reasons why he should not pay back the full value of the contract.

Now, he had provided a laundry list of "expenses" that I owe to the tune of $4,000 and he tells me he's not going to pay me a dime until "we" agree on the matters. These "expenses" include his time in getting his belongings from our office after we closed the business (he valued himself at $50/hour and said it resulted in 12 hours of work) and reimbursement for a $100 gift card (with a greeting card) that he gave to me for helping him out of a tough situation.

The amount is too big for small claims. Unless I agree to the $36,000, he will not pay me a dime. His expenses are frivolous and wouldn't hold up in small claims court. Can I somehow agree to his demands, but then sue him after I have the $36k in hand? Otherwise, I think i will have to get an attorney and that is going to be costly.

I spent a lot trying to close my business and liquidate everyhing and have limited funds these days, so this is causing a lot of stress.

8 years and I never needed one and now this. What a bummer!!!

Isn't what he's doing blackmail? If I don't agree to his demands, he won't pay me anything? I'm assuming if I verbally agree, he is going to want something signed with me stating I won't sue him.

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$36K in your hand seems a lot better than a lawsuit to try to recover $40K. It is always a good idea to consult with a lawyer but I don't think it will make sense to litigate.

Normally I would agree that $36k in the hand is far better than fighting for $40k

If you want this over and done with , take the $36k


However you mentioned something about you getting an equity stake in his $5mm business . If you have a potential equity stake (how much would it be ?) and he is being a )&@", find a lawyer to take this on contingency and get your stake of his business

Chances are you'll settle for something far larger than $40k . But it will be a tedious and contentious process . You'll have to weigh what's best for you

Get the $36k; it's a lot better than going through the expense and aggravation of a lawsuit.

Another option is to push back that you'll sue him and try to get him to at least "compromise" on 38k or something. I mean, he can't really believe he could win a case for 12 hours (or ANY hours) of pay for "gathering belongings"...

What exactly did you do that was worth $40k?

SUCKISSTAPLES said:   

However you mentioned something about you getting an equity stake in his $5mm business . If you have a potential equity stake (how much would it be ?) and he is being a )&@", find a lawyer to take this on contingency and get your stake of his business

Chances are you'll settle for something far larger than $40k . But it will be a tedious and contentious process . You'll have to weigh what's best for you


This really does seem like a very large bargaining chip.

If the business is worth $5m, he is being an idiot to worry about $4k as the other option is that you own some percentage of his company. It is worth $5m or does it get that much in revenue?

SUCKISSTAPLES said:   ...you mentioned something about you getting an equity stake in his $5mm business .OP please elucidate this point.

Something isn't adding up here. He is pissed that he has to clear out from his part time job with you while at the same time he has a huge pile of new money. Did I miss something?

DrWu said:   
Isn't what he's doing blackmail? If I don't agree to his demands, he won't pay me anything?


If that was blackmail every business deal ever would qualify as blackmail.

Sue his ass!

Elaborate on the equity thing for a more solid answer.

OP, there is something called the "preexisting duty rule."

Look this up, and good luck to you.



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