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Ask a Lawyer -- Corporations
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Question: I am minority owner of s corp shares, the other 3 owners also work in the company full time. we all started the company in 2002. The only distributions were given out for tax purposes. we have been profitable the last 3 years. I want to leave the company and sell my share to other owners. How do you determine present value of the shares (120,000 shares were origially issued and I owe 10,000 shares, at start of company share price was .10 per share). Also, the profits every year went back into company, could I expect to receive a distribution (of my portion of profits for the last 4 years) upon leaving the company? Response: Sorry, I have bad news. Unless the shareholders of this corporation have entered into a buy-sell agreement (or a redemption agreement with the corporation), there is no duty on the part of the remaining shareholders or the corporation to buy your shares when you withdraw from active participation in the corporation. In cases of an S corporation, the situation is even worse. The corporation's profits are taxed to the shareholders presently; however, absent a shareholder agreement to the contrary, the corporation is not required to pay sufficient dividends to the shareholders to cover their tax liabilities for the corporate profit imputed to the shareholder on the annual K-1. Submitted: 5-1-2006; Frank, Illinois Response: 5-8-2006; JJR Add A Comment |
Ask a Lawyer, Corporations Archives
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