Hi, I’m a freelance software developer. My friend had an LLC and wanted me to join him for a project to revamp his online store.
I invested 5k and entered only a profit-sharing scheme. I worked on top of it, being in charge of the project. If successful, the profit shares would have been a great return. Big IF but I knew the risks.
However, soon after starting I noticed that my friend had exaggerated his financials and had no plan as to what he wanted to achieve. Also, I had to incur extra costs like shopify themes and other tools that he said he would reimburse me for but made a lot of excuses to not pay them back.
Fast forward to a couple weeks after we started, he’s shutting down his LLC. I told him we should re-do the contract since I signed with his LLC if the project should continue. He’s gaslighting me into doubting him and telling me to just trust him and not worry about it. Obviously I’m not stupid and I’m catching onto his conman traits such as talking big and always mentioning his big past successes and the high profile people he knows.
Basically he has no intentions to re-do the contract and firm on not returning my money. He constantly reminds me “if you quit the investment is lost” (actual clause in the contract). No clause about what happens if the LLC disappears. What are my rights? 5% of me says I’m misreading the situation but my gut instinct is so strong on this one. I think I would sue and just lose this friend.
You must log in or register to comment.
5k loss is a good lesson to remind you that you can’t call everyone that you get close to as “friends”
Real friends are a fucking investment that pays dividends. This mothefucker isn’t one of them. He fucked you from the start. He was never a friend to begin with.
5k is nothing in this climate. the legal fees arent worth. Consider it a cheap lesson and that you dodge a bullet. The longer you spend time with this cancer, the worse it gets. Go find new people. if you’re a good enough software dev, you’ll be fine.
If you can, lock him out of the website, shopify, or anything else you have access to that you’re paying for.
$5k plus the cost of Shopify plugins is in small claims territory in a lot of states. The forms are easy to fill out and filing plus process server fees are cheap. You’d sue both him and the LLC and your argument is going to be that he completely defrauded you. You can renew a judgment for a relatively trivial sum, so even if you can’t collect now, you can collect the judgment when he’s less broke.
It’s up to you whether rolling the dice in front of a small claims judge is worth the time and energy.
Where are you? Could try a small claims court. The claim hinges on them misrepresenting the situation - so did they do that? Were you aware, and was it possible, for you to know what you got yourself into?
Walk away. Study the contracts, lessons, and try again with a new partner.
FWIW: I lost 300K this way, in a similar situation, and the person I chased for years issued me shares and contracts FINALLY, that he later diluted by 10000x (meaning, now they are worth 32 dollars).
At the end of the day, unless you own a large percentage, the founder can screw you in about 1000 ways – once they show they are willing to do this – walk away.
Let this be an education for you. Only investment you should make is with yourself. Your friend was underfunded and had no chance to succeed. Besides, all he had to do is pay himself a salary and declare that there was no profits.
You got suckered. Move on to something better. Learn your lesson then forget about it.
Ask if getting his ass beat is worth five grand.
Lesson learned. You need to do your due diligence before writing a check next time
Walk away and avoid situations like this.
I am willing to give you the same deal without the money investment.
Don’t get into litigation, but also loose such a friend, who caused you to spend 5K without any compensation.
Everyone here seems to love telling you should never do business with friends. But based on what you’ve written, it seems like you’ve already learned that lesson the hard way, and all the commenters reiterating that doesn’t seem to be helpful at all.
What you need to do is apply serious pressure on this guy. You’ve said you are willing to lose this friend, so show him you are not fucking around. Call him and tell him in a very calm and collected manner that you are entirely fed up with the situation and you want out right now. You expect him to send you back all of your money immediately or you are taking him to small claims court. Do a little research and have some documents from the court ready to send over to him (even if it’s just a bluff for now). He will hem and haw and come up with every little excuse in the book. Again, calmly tell him you are not interested at all in anything he has to say. Pay up now or we can do it the hard way.
The only other good idea I saw here was the idea of undoing all the work you did somehow like re-coding everything and/or re-routing the URL. That will also give you some leverage. This is not over. The people telling you to just forget about $5000 are silly, but for the sake of a thought experiment, let’s use it to your advantage. The $5000 is gone but now you have an opportunity to earn $5000 with about what, 10 hours of work? Don’t take no for answer.
Think of the LLC as a person.
Your formal business relationship is with the LLC. LLC closed down means good bye 5K. Proving intend to defraud is something you may want to discuss with a legal professional.
You stated that your friend has no business plan or strategy. So if you were to evaluate today what your friend brings to the LLC, what would you say?
As mentioned by others, 5k is more of a learning experience than an amount that is worth recovering unless there are intangibles that make it personally worthwhile for you.
Can you maybe expand on what he means by “if you quit the investment is lost”
Ouch. So basically instead of paying you to revamp the store he got you to pay him and do the work, and then shut down anyway after a few weeks?
Sorry you got hosed on this one. But here is where you may have something.
Since the company was dissolved: All assets and IP stay with the dead company, unless they are sold. All debts should be paid to outstanding balances. Any remaining funds must then we disbursed according to share percentages, in your case 5%.
You do not have any interest in a new company formed, nor does he have the right to use assets from the former company without reimbursing you, as you have a 5% stake in those assets.
If i were in your position, i would 1) not quit, just become generally unavailable except for when you actually have free time (an hour two a month) 2) i doubt you had a lawyer look at the original agreement, because that clause about you quitting and voiding the entire “investment “ doesn’t sound like it would be enforceable. 3) legals fees in the US make suing over this unlikely to bear any fruit.
My only reservation is that this all occurred within the period of a few weeks. Which is an amazingly short period of time to go from “this is worth making a profit share agreement” to “i closed the llc”. Which makes me think that maybe this isn’t the first time it’s happened and there may be other victims. I would do some research and if I find evidence of an ongoing scam I would file a police report And follow up with the local prosecutor’s office.
I’m new to Reddit. Want to get people to test out my prototype. Would appreciate any uparrows so I can post a bigger announcement
If the LLC has no money, there’s no point suing it. Forget about it, learn the lesson, and move on.
You knowingly took the risk. Now that it hasn’t worked out, you’re trying to blame yourself. Take responsibility for your own investments and do proper due diligence.