Ownership Confusion

[TheCloser]

Hello Everyone,

I've found myself in a inadvertent predicament.

There are 3 people here, player A, player B, and player C.

Player A and B are funding a business (business A) with player C. Player C is an important part of business A. Player A and B intend on creating a second business (business B) that is associated, but different, from business A. Players A, B, and C have all had a large hand in making business A. However, only players A and B will have a part in making business B. Therefore, players A and B will be the only owners of business B and fully intended on that the entire time.

The problem is player C has mistakeningly determined that they will be an owner of business B. Perhaps this was lack of explanation from players A and B. However, I can wholeheartedly say that was intended from the start and did not intend to cause confusion.

I don't want to make player C mad since they are important to business A.

My question is: how can I best inform player C of what was intended from the start? Do I bring it up to them? Do I wait until they bring it up to me? How do I explain this the best way without insulting.

This is a sticky situation that was unintended. I appreciate your help and assistance in this.

 

[djbaxter]

Tricky situation and not one I've ever had to face personally.

I hope others will reply to this dilemma for you. In the meantime, it seems to me to be obvious that sooner or later someone is going to have to inform Person C that s/he will not be a part of the new business.

There's another question, though: Is there some reason that Person C cannot or should not be a part of the new business, since they have contributed significantly to the first business?

 

[TheCloser]

Hi,

Business B requires significant work and person C is not qualified and does not contain the expertise to be of help. Therefore, they'll essentially not be doing anything.

In business A, everyone is an owner and everyone contributed significantly. So player C would be getting free quite on business B.

 

[djbaxter]

Business B requires significant work and person C is not qualified and does not contain the expertise to be of help. Therefore, they'll essentially not be doing anything.

Ah, okay. Then that makes it simpler in a way. You need to bite the bullet and make it clear to Person C that the new venture will not include him. Better to do it sooner than later, in my opinion, before he gets any more excited about the new business.

You need to do this tactfully and with sensitivity, of course. Emphasize that his work and expertise is valued, has always been valued, and will continue to be valued in Business A, but that Business B is a different kind of business and he simply doesn't have the kind of expertise that is required for Business B.

 

[Small to Feds]

A practical way to work this issue is to mutually develop business plans together, as well as associated operating agreements. The roles, ownership and participation in the business(s) or lack thereof, will be the end products and the agreements will be signed by the participants to reflect the result.