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Law Pro
Law Pro, Attorney
Category: Business Law
Satisfied Customers: 24870
Experience:  20 years experience in business law - sole proprietor, partnership, and corporations
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Im 50% shareholder of a S-Corporation that recently closed

Customer Question

I'm 50% shareholder of a S-Corporation that recently closed the doors. The other 50% shareholder is eligible for social security benefits and wants his wife to obtain his title of President and he wants to be Chairmen of the corporation; so he can receive his social security benefits, but the business is closed. Is this legal since the business is closed?
Submitted: 7 years ago.
Category: Business Law
Expert:  Law Pro replied 7 years ago.
It's closed - but is it dissolved?
Customer: replied 7 years ago.
It's closed but it won't be dissolved until March 2010.
Expert:  Law Pro replied 7 years ago.
How are they swinging this? Are they doing such - just for the time so he can become of age. How are they paying themselves anything?
Customer: replied 7 years ago.
Yes, time for he to be become of age. (65 in Feb. 2010) He is receiving unemployment at this time
Expert:  Law Pro replied 7 years ago.

So, he laid himself off from the sub-s corporation?

 

What exactly would she being doing for the corp - signing off that he's still unemployed?

Customer: replied 7 years ago.
The company is closed and we both are shareholders. We were also employed by the corporation running day to day operations. The company is closed and we are drawing unemployment. His wife will be doing nothing as President; but he wants to separate himself from the corporation as Chairman to receive his social security benefits in Feb. 2010. Will this move leave his debts on his wife and is the legal with company closed?
Expert:  Law Pro replied 7 years ago.

Both would be liable for the debts of the corporation unless it would file a bankruptcy.

 

Do they owe you monies?

Customer: replied 7 years ago.
No, they don't owe me monies. He has personal debts such as credit cards that he use his SS# XXXXX odtain in the company name and loans he obtain using his SS# XXXXX he is trying to get me to pay half of that debt. These debts were used for his personal use. I thinking if he transfer his office of President to his wife and he separate his self from the company as Chairman he will not liable for those debts.
Expert:  Law Pro replied 7 years ago.

That's not true - if they were his personal loans then he's liable for such. He can't dump that debt onto the corporation and thereby you.

 

To, what he would potentially be doing is fraudulent. Now not that he's retiring and collecting unemployment - but dumping the personal debt on the corporation would be.

 

Till the business is dissolved - it just has to operate without committing fraud.

 

So, your original question:

 

I'm 50% shareholder of a S-Corporation that recently closed the doors. The other 50% shareholder is eligible for social security benefits and wants his wife to obtain his title of President and he wants to be Chairmen of the corporation; so he can receive his social security benefits, but the business is closed. Is this legal since the business is closed?

 

 

If the By-Laws allow for her to become the President and you don't object - then she can do such.

 

The business can continue to operate until dissolved. When the business is dissolved - there are special requirments for doing such.

 

To dissolve a North Carolina corporation it is necessary to file an Articles of Dissolution form with the office of the Secretary of State in Raleigh. The decision to dissolve must be made in a manner compliant with Chapter 55 of the state's general statutes.

Information necessary to complete the Articles of Dissolution form includes: the name of the corporation, the date dissolution was authorized, and the effective date for the dissolution. It is also necessary to include the names, titles, and addresses of the officers of the corporation along with the names and addresses of its directors.

The Articles of Dissolution form for a North Carolina corporation may be downloaded from :

 

http://www.secretary.state.nc.us/corporations/Forms.aspx?EntityId=2719924&Type=BusinessCorporation# .

Law Pro and 2 other Business Law Specialists are ready to help you
Customer: replied 7 years ago.
If I object to her becoming President and our acountant has started the process of dissolve of corporation and completing the forms for the State. I think that the process needs to be dissolve in the path that this with no corporation change to make sure no fraud is done.
Expert:  Law Pro replied 7 years ago.

You can object to her becoming the President as 50% shareholder and pursuant to the By-Laws certainly.

 

I would not want to be in your position knowing what in reality is going on and not preventing them from their actions. If they want to sign a hold harmless agreement and buy out your interest in the corporation - that would be great and they can do whatever they want to do - your out without any knowledge of anything.

Customer: replied 7 years ago.

The minutes that he had the accountant write up; I'm not going to sign off, because there was no meeting and this is fraud. Thank you Law Pro

Expert:  Law Pro replied 7 years ago.
Yes, make sure you mandate that the formalities be followed or you could be in jeopardy yourself. Make everything of record to CYA.