Ask a Business Lawyer. Get Business Law Questions Answered ASAP.
Hello, I will try to help you. Please remember I just report or interpret the law, so the outcome may not be what you hoped for. What would you do differently if you controlled the company? What prevents you from doing what you would other wise do? Do you see a way to improve the financial condition of the company? Will your father turn control of the company over to you?
Hello, and thank you for your time.
The main problem is that my dad simply cannot make $60,000 a year. He has to cut back or we are going to go under. What would I do differently? I would enforce this pay cut, but somehow I have to make him understand that unless he does so, the business is done and he will have no income instead of some. He is torn between living this beautiful house and fancy car, etc. I am torn thinking that, sure I can live in the factory so that my dad can enjoy his senior years, but lets say he lives another 20 years, then I'm 70 and the company will never be mine because he will continue to keep us in debt.
I'm sorry, I keep hitting the enter key... Can you please start by telling me two things. If he gives me the company in his will, do I have to take it? Or can I say no. And I ask this because we will never get out of debt with him in control. And if I chose to stay because he cannot run the business anymore, then I don't want to be stuck with all the debt that he leaves behind. I feel that if the company is paying his $2200 a month life insurance policy that leaves his wife a half million, then she should inherit the debt he leaves behind. Which then leads to the second question. He is the owner of the company, and during his years as president and owner he didn't pay payroll taxes on time. The irs is working with us for some long term payment plan. So if he dies and leaves the insurance to his wife and the company to me, who is responsible for the back payroll taxes.
Good morning Jill at Zenith: Another contributor here. There is some additional information that is needed to analyze your legal situation. Is the company a corporation or other kind of legal entity? Who owns the stock or controlling interests? Who owns the life insurance on your father? Is it term or ordinary life that has a cash value? If the latter, do you know the value of the policy? How likely is your step mother to cooperate if it means giving up some or the life insurance, or moving to a less expensive home? You are in a very difficult situation family and business wise, but if the business is fundamentally sound there should be a way to work out a solution where everyone wins.
Hello! Thank you for asking more questions! The company is an S Corp. My father is owns 100% of the stock. Several years ago, he did show me the one page in his will that says the I (and only me) inherit the company. I have a brother and 2 sisters who inherit the building that we run the business out of, but he is now trying to sell to save us. However, what he doesn't seem to understand is that if he sells the building, not only do I have to make more money, because right now I'm not paying any rent etc, but we will also have to rent space somewhere else and we have absolutely no idea how much we are going to be able to rent for. The mortgage is $2300 a month and right now we have 4 renters that pay us right around $1000. So truthfully, we are only paying $1300 a month - and if I'm not going to live in the gutter, I am going to have to make an additional $1000 a month. So to me, it doesn't make sense to sell the building. That however, is not my decision.I don't know if my dad or stepmom own the insurance or who is the actual owner, I know that the bills come to him and she is the sole beneficiary. Hm, I apologize, I get confused about term or ordinary. I do know that if he is still alive in 10 years, it's worth nothing, but the payments will continue to go up every year. As far as my stepmom giving up anything, I hope I am wrong when I say she will let him go and take him for everything he may or may not have if he has to take less money, but I do know how desperate he is every month counting the days until we get money here so he can pay it that insurance premium.Ah, and your last comment is both true and comforting to me. I am in a very tough position. I am hoping to have all my facts ready and I want to present him with some very solid proof that we will not make it much further if something doesn't change right now . I also want to offer him some options, including my reasons for not staying if something doesn't change. I am sincerely XXXXX XXXXX any help you can offer me.
Hi Jill: Applying my vast storehouse of legal knowledge and over 4 decades of experience, your situation can be summarized in one profound word: YIKES!!! It appears that Dad and Step mom are in denial and do not want to face unpleasant facts of life. The only rational course of action I see is to call a family conference where everything is laid out on the table, and I mean everything. But don't do it yourself. Try to involve your father's accountant and/or lawyers to be the bearers of the unpleasant facts and explain his options. He is far more likely to listen to them than to you. Let the professionals tell him flat out what he has to do immediately to have a chance to survive. My suggestion (or demand if I were you) is that your father transfer the company to you now, while there is still something to transfer. There's no reason for him to retain his stock at this point. Yes he can control the last few months of cash flow, but then it is all gone, and you're all broke. If he still won't listen, then you have to consider a court appointed conservatorship and a competency hearing. I think the Ace of Trump that you are holding is the life insurance. Continuing to pay that premium (BTW, I know a 96 year old lady whose family is now paying $44k per annum to maintain $500k.) is on you and the business's shoulders. If the business fails, the premium isn't paid and the insurance lapses. Step Mom gets zero. I think that fact might serve to motivate some people to do what needs to be done to avoid that happening. You're sleeping in a room in the factory?? I would utter a phrase beginning with the letters W T F to that, but I don't know you well enough and it might be offensive. You sound like an incredibly loyal daughter facing horrendous problems. I'll contribute what I can in the way of ideas. Oh yes, about the sale, lease-back of the building, I don't know enough about the details to tell you if it's a good idea or not. Sometimes they work very well by providing necessary opperating cash, but if all it does is increase your monthly nut, what's the point?
I hope this information is helpful and that you will enter a positive rating. I thank you for submitting your question to Pearl-Just Answer. We appreciate your business. If you need clarification or additional information, please send me a Reply and I will be happy to explain further.
Wow! That was amazing! Thank you, XXXXX XXXXX just given me a ton of strength! and jeez, I could ask you questions and give you details all week - cuz I bought the "all-you-can-ask" deal ...lol - but I think you have given me what I need to make this happen.Can you tell me though, about the tax issue. Upon his death, will I be responsible for debts he incurred as the owner? or my step mom? or is that something that we need to agree on now?I truly thank you for your time, and please go see our website www.zcwinc.com, and if you are comfortable doing so, I would love to send you a couple of the amazing product that my great grandfather invented in 1908 ( and I am not about to let it end here) . I would just need your address. I will surely rate your assistance as EXCELLENT and if I do think of something else I hope it's ok to request you again!
Upon his death, will I be responsible for debts he incurred as the owner? or my step mom? or is that something that we need to agree on now?
No. Only the corporation is liable for the business debts. Neither your father's estate nor you are personally liable. So you will get an insolvent business and the insurance that is payable to step mother is hers free and clear. (and BTW, one does not have to accept a bequest. You could renounce it and walk away. But there are better ways to deal with that when the time comes.) Are the premiums being deducted as business expense. I suppose not because the business isn't a beneficiary. Your accountant and attorney should check into that. Perhaps some of it could go to the company to at least pay the IRS. I checked the website. It sounds like a great product, except that once you buy one it looks like you'd never have to buy another one? LOL
Thank you again for your time, and wonderful assistance. Ok, can you please help me understand? And no one will have to pay the back payroll taxes, if I don't accept the company. Am I able then to open my own company and make the same products that we make? ...I mean I have the contacts, and I know how the company is run. Is this something I should do now? I have always wanted to change the name to something without the word "chemical" in it. I have thought about just using Zenith, or ZCW~ the product is green, if you will, and we often get calls and inquiries about chemicals, I'd like us to be away from OSHA and all that goes with it.
I forgot to tell you that we also manufacture Fast Frets for GHS Strings. http://www.ghsstrings.com/ We don't actually tell anyone that we do because it is the same formula as the Almond Stick. and the Fast Fret is smaller than the Almond Stick but costs more. Sadly too, is that they are 3/4 of our business and we are on the verge of losing them because we are unable to come up with $5000 that we need to prepay for that wooden handle that we need to make it. We are over a month behind in shipping and if we ever come up with the money, it's going to take 3-4 weeks to manufacture them. Oh wow, I am really sorry if I keep complicating this with more details, but you are so helpful, that I just can't stop. Do you feel that it would be in my best interest to just start my own company now? I think I could probably get a few investors and it really wouldn't take a whole lot to get started. If I do this, then I would be in control of the money and pay my dad as an employee or consultant. Hm, you really got me thinking....So what else? (i promise i'll "tip you", can you advise what you think I should pay?)
Jill: Note: This is not a secure website. You should ask customer service to close the question so it can't be viewed by anyone who googles the product on line. I am not sure how the back taxes for payroll tax works, i.e. whether officers and directors of a corporation are personally liable for those, so before you take over the company you need to research that with your accountant. The way payment works here is that each time you click on a positive rating for an Answer, I receive the amount that you offered for that Answer. I don't know how the "all you can ask" program works.
I am looking for more information on this family/business question~I thought this question was closed and am confused to see that it may not be. Before I continue, I would just like to ask, should I open a new question? Should I just go from here? Will I be able to work with you again? Thank you.
DISCLAIMER: Answers from Experts on JustAnswer are not substitutes for the advice of an attorney. JustAnswer is a public forum and questions and responses are not private or confidential or protected by the attorney-client privilege. The Expert above is not your attorney, and the response above is not legal advice. You should not read this response to propose specific action or address specific circumstances, but only to give you a sense of general principles of law that might affect the situation you describe. Application of these general principles to particular circumstances must be done by a lawyer who has spoken with you in confidence, learned all relevant information, and explored various options. Before acting on these general principles, you should hire a lawyer licensed to practice law in the jurisdiction to which your question pertains.
The responses above are from individual Experts, not JustAnswer. The site and services are provided “as is”. To view the verified credential of an Expert, click on the “Verified” symbol in the Expert’s profile. This site is not for emergency questions which should be directed immediately by telephone or in-person to qualified professionals. Please carefully read the Terms of Service (last updated February 8, 2012).