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BizLawyerNate
BizLawyerNate, Attorney
Category: Business Law
Satisfied Customers: 10685
Experience:  7 Years of Legal Experience Representing Small Business Owners
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I have started a business a few years ago (which I am trying

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I have started a business a few years ago (which I am trying to no longer be a part of) and I would like some advice as to the best course of action I should take to prevent this business from becoming a nightmare for me later. Here are my details.
The business is an arborist firm specializing in difficult tree removals and disease treatment. I (21 at the time partnered with an 18 year old to start this business. I had the funds and he supposedly had the knowledge of the industry to make it work. We incorporated as an s-corp in texas. I was the vice president, my partner was president and a third partner was the secretary/treasurer. Soon after we incorporated we more or less kicked out the third member because he was unwilling to relocate to dfw with us and replaced him officially with my remaining partners wife. I purchased some commercial trucks and equipment for us to use in the business, which I titled in my name directly. We never divided the shares of the corp. almost never did the mandatory meeting for an inc, and my partner irresponsibly spent all of our funds as well as our tax savings which was our sales tax collected and income tax withheld from our employees checks, racked up debt with vendors which has never been paid, not honored warrantees for customers, etc. after about a year I decided tree care was not for me and I went back to my former career and accepted a very good job allowing my partner to run the business alone. After a couple months of this I decided enough is enough as he showed no signs of improvement. I decided to cut my losses at this time. One night I moved all the trucks/and equipment to a location which my partner was unaware of. Since this time we have not been on very good terms. My partner refuses to agree dissolve the company. My parner has no equipment, no funds, and almost no vehicle to use to run the business. He has the 1500 dollar jeep I bought him (and titled in his name) and a very old unreliable truck that he basically stole off of ebay by telling pay pal that the truck was not as described after driving it 2000 miles away from its home making it not worth recovering by the seller. To the best of my knowledge my partner is getting by on welfare and scamming our client database that we earned together honestly. Here is what I have.
All the equipment that I bought. (which will allow me to recoop most of my funds upon sale.
At one point I almost took out a small business loan for several hundred grand to pump into our business. Luckily I came to my senses and didn’t do this. (I would have had to put up all my personal property for collateral) anyway my partners credit was so bad that they would only do the loan if the business was 100% mine. So I have a stock paper declaring that I own 100% of the shares of the company signed by my partner, his wife, and stamped with the company seal. (im not sure if this is legal/valid)
My original thought process was to get out of the company let him have it and all the debt will follow him. Now im thinking that this might come back and ruin my life in a few years after he gets caught doing something illegal. And that now the best thing to do is to find a way to forcefully dissolve the company even if I have to pay all the debt and taxes out of my pocket just to make it all go away..
I have recently got my partner to agree that he owes me 10 grand and he is willing to sign something saying so in exchange for my giving him some equipment. But what is most important is not getting into trouble later. The money is second most important. haha
I need an experts advice on what will be the cheapest way to get out of this mess…
Thanks
Submitted: 5 years ago.
Category: Business Law
Expert:  BizLawyerNate replied 5 years ago.
Thank you for your question and welcome to Just Answer.

I saw this and it piqued my interest:

"My original thought process was to get out of the company let him have it and all the debt will follow him. Now im thinking that this might come back and ruin my life in a few years after he gets caught doing something illegal. And that now the best thing to do is to find a way to forcefully dissolve the company even if I have to pay all the debt and taxes out of my pocket just to make it all go away."

What illegal activity are you thinking he might do that could possibly come back to you?
Customer: replied 5 years ago.
the main thing is not paying sales taxes. And also witholding income tax from employees checks and not giving it to the irs. (I dont believe he has the means to hire help anymore though)
Expert:  BizLawyerNate replied 5 years ago.
Well, anything that is done AFTER you no longer have any ownership interest is not going to be your problem. You could have issues for past acts, but since you've been involving in running the company, you'd know yourself if there were any issues like that lurking out there.

The law won't follow you for actions taken after selling your ownership interest. If that is concerning you, don't let it.

Customer: replied 5 years ago.
I'm not sure if I have Actually sold my interest. all I did was resign as vp. And he wrote me a letter acknowledging that. I might still own all stock and he may have never informed the state of my resignation. Also I would guess we owe the Gov 2 or 3 grand from before I resigned as well as stiffing several vendors out of up to 5 grand would be my guess.
Expert:  BizLawyerNate replied 5 years ago.
You need to convey your membership interest in full to him. That can done in consideration of the $10,000.00 he owes you.

If the vendors are stiffed after you leave, and you did not sign a personal guarantee, that's their and his problem, not your problem. You do want to ensure the taxes are taken care of because that can flow through to the owners if unpaid.

You don't have to inform the state of internal LLC changes in Texas. All you need now is to do a membership interest / stock sale agreement. That will make sure you're no longer an owner and subject to anything he may do.
BizLawyerNate and other Business Law Specialists are ready to help you
Customer: replied 5 years ago.
Ok. So what would be the first step in making sure I'm square with the government if I no longer have access to any records, bank statements etc?
Expert:  BizLawyerNate replied 5 years ago.
Call sales tax collection and see what is owed on the company's account. Pay what is owed and do that with whatever other tax obligations you think you may currently have from the company. There may be a small window that you miss between conveying your ownership and paying what is owed now, but that's just something you're going to have to deal with if it ever becomes a problem unless he'll let you review the company's records in order to sort out the tax liabilities right now.