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I own 25% of a small business that has been doing poorly. Is their any consequence for trying the same type business with some else?

1 Answers. Asked on Oct 09th, 2013 on Business Law - Oregon
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There are 4 owners 25% each. Must I abandon my stock before trying business with someone else or can I do it with no problem?
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Answered on Oct 10th, 2013 at 11:51 AM

Are you only a minority shareholder?  In general, absent an agreement to the contrary, minority shareholders do not have a duty not to compete with the corporation in which they hold shares (assuming that they do not using any of the corporation's assets, including proprietary information, to do so).  If the corporation is a close corporation (has few shareholders), majority and/or controlling shareholders might have such a duty, but minority non-controlling shareholders would not. 

However, if you are also a director, officer, or employee of the corporation, you may have a duty not to compete with the corporation, even absent a contract so stating.  Also, it is not uncommon to find provisons which restrict the right to compete in shareholder agreements, or employment agreements - if you are party to either or both, you should review them carefully before proceeding.  Finally, even if you can freely compete, you can't use any of the corporation's assets - employees, telephones, office space, proprietary information (which, in some cases, can include customer lists) to do so.

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Business Law
Beginning on the day a new business is launched, it will encounter a host of legal issues. From selecting the optimal business structure to negotiating contracts, from ensuring that the company's name doesn't infringe on another business's intellectual property to hiring new employers--almost everything that small business owners do touches on some aspect of business law. As a company owner or manager, your focus should be on successfully running and building a business. A law firm that focuses on business law will have attorneys who have a broad cross-section of experience on the myriad legal issues that affect all businesses, large and small.
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