[TX] Is it legal for my boss to make me a partner and then have the business take out a loan to cover the buyout amount?
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The terms seem odd and potentially leave you on the hook for the debt. I would not proceed this way. You should pay for the business assets through an asset purchase agreement, not by taking on company debts.
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My boss is wanting me to buy the company that we work for from him in Texas, but I am having trouble getting funding. Is it illegal for my boss to make me a partner and then have the business take out a loan to cover the buyout amount?
I understand your concern. Have you already discussed this arrangement with a legal advisor?
I don’t know.
Are you currently under any contract or agreement with your boss regarding this potential partnership and buyout?
No.
Is there anything else the lawyer should know before I connect you? Rest assured they’ll be able to help with your partnership buyout.
No.
Hello and welcome to AskALawyer! My name is Daniel, and I’m a licensed lawyer with 21+ years of experience. It’s a pleasure to meet you!
I’ve reviewed your question, and I’m sorry you’re dealing with this — I know it can be hard and time-consuming. I’m here to help.
As we chat, I’ll respond as quickly as I can, though sometimes I may need a little extra time. To begin, I have a couple of clarification questions:
Given everything that’s happened, what outcome are you hoping for now?
I am hoping to be able to buy the company from him. I’ve worked there for several years and am trying in any way (legally) that I can to get the money to buy the business.
I have been turned down for several loans, including SBA loans. The amount in question is $150,000 to purchase the company.
Have you agreed on an amount and have you signed a contract?
An amount, yes — $150,000. Signed a contract, no.
To restate the question — I’m wondering about the legality of my boss making me a partner, then the business pulling a $150,000 loan. My boss would take that money (the $150,000), sell me his share of the business for a dollar, and I (as the now sole owner of the company) would assume the debt and pay it back as the company.
The terms seem odd and potentially leave you on the hook for the debt. I would not proceed this way. You should pay for the business assets through an asset purchase agreement, not by taking on company debts.
Okay, I am unable to get a personal loan due to bad credit, but the business can, so I’m okay with taking on the company debt. What I’m asking is — is it fraud or not?
Not fraud, as long as the loan is for the business and gets repaid.
