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The state could only control his 10% owner interest and be entitled to anything he would be entitled to. If he has no authority to control distribution of assets/profits, then they can't do that on his behalf. However, if you make a distribution to him according to the bylaws
of the corporation, then they would stand in his shoes to receive that distribution. The time this type of situation becomes a real concern is when the shareholder
owing debt is a controlling shareholder.
The following link is to a website that provides a pretty good summary of what the risks are to having a creditor get a judgment against a shareholder and attach his/her stock:
Here is a quote of the summary provided:
"If you own shares in a ... corporation, your shares may be attached and sold by your creditors following a judgment .... In such cases, the creditor ... steps into your shoes and will have all of the rights you had as a shareholder including voting the shares (thereby influencing appointment of directors and operating issues), receiving dividends, the right to accountings and inspection of books and records, and the ability to bring shareholder derivative actions. In short, the creditor may (depending on the size and rights of the shareholding) obtain significant control over the company, and, because the shares are assigned to the creditor, he receives the shares in perpetuity. In closely held
companies such a result can be highly destructive to the business and may ultimately result in its liquidation."
Again, though, when it's a small minority shareholder, the chances that the creditor can cause any significant damage is drastically reduced. However, it could affect your business if the stock is taken out of the hands of the licensed contractor (causing you to have to bring someone else in that is licensed).