Very helpful. You're right, there are two options.
I've considered suspending the business as you mentioned. Which would be quite easy to do, our burn rate is negligible (could be near free). While earning funds to continue operations, I could spend personal time rebuilding the brand materials.
My concern is not knowing how to approach a business cofounder who would be entirely uninvolved in such effort. Can I make a clean break and take over that portion? Or, essentially, start a new company on my own? Our partnership agreement is very basic, and does not cover this situation.
So I would be unaware of what would be right both ethically and legally. Thoughts?
Legally, I have no idea as I'm not a lawyer and even if I were I'm probably not even living in the same country, let alone the same state. You really need to talk to someone qualified to answer that.
Ethically...I think as long as you are above board and honest with all parties, explain the situation and what needs to happen, then you're probably OK. Running a business involves making hard decisions such as firing employees and dumping cofounders. If you can't face doing these things then you're not cut out for running a business (I've had to do it, and hated it). However it's important that even when you have to do these things that you are honest and as decent as possible at all times.
Ethically I think the right thing to do is talk it over with your business cofounder, and to come to a mutually-agreed decision.
Is your business a company with two owners or a partnership? If it's the former, I think you'll have to buy out your cofounder's shares. To determine their valuation, I think you'll have to talk to an accountant. If it's a partnership, I think you'll either have to get a new partner, or start a new business.
Have your ex-partner sign a release of his interest in the LLC. He basically gives up all his rights to you for the business. You can convince him to do this by telling him that you will take on the trademark suit yourself.
Then I would wait for the C&D too, like patio11 said. Most people that have been in business have sent and received both, and many are in a position like me where I can just have my lawyer buddy change the name from the last notice he sent for me, and he does it for nothing (or a beer). So a C&D is really not that expensive either - and if he won't do that he probably doesn't think he has much of a case.
You can do a quick search at USPTO.gov for federal trademarks, but don't forget to do it at the state level too. This guy may only have a trademark at that level and thus have no case against you. If he has a non-ambiguous federal trademark for your industry, then you should bail out of the name immediately. I once spent $3000 on lawyers fees because I bought an $8 ___domain name with somebody's trademark on it. I had to give it to them of course, in forgiveness for them not suing me for damage. Oops. If you have to give the ___domain over, you may find middle ground by convincing him to let you redirect it to your site for a while so your print advertising doesn't go to waste.
One more solution comes to mind if the other company is in the exact same business as you. Team up. Figure out how you can mutually benefit from each other. It might help your business get going better, and may handle business he can't reach because of distance.
I've considered suspending the business as you mentioned. Which would be quite easy to do, our burn rate is negligible (could be near free). While earning funds to continue operations, I could spend personal time rebuilding the brand materials.
My concern is not knowing how to approach a business cofounder who would be entirely uninvolved in such effort. Can I make a clean break and take over that portion? Or, essentially, start a new company on my own? Our partnership agreement is very basic, and does not cover this situation.
So I would be unaware of what would be right both ethically and legally. Thoughts?