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My business partner and I have a corp. We have a business bank

account which we are both...
My business partner and I have a corp. We have a business bank account which we are both on as account holders. We rent vehicles. However, the vehicles are owned/registered in my name. The vehicles are not owned/registered to the corp. Nor are they anywhere in any paperwork in the corp. name. However, we rent said vehicles under the corp. name and TIN. What is my business partner own half of? What's in the bank acct.? Or, is he due half the value of the vehicles as well? Even though vehicles are owned/registered by me? I just want to make the split easy.
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Answered in 39 minutes by:
7/1/2012
grantlawpc
grantlawpc, Attorney
Category: Business Law
Satisfied Customers: 31
Experience: Business Restructuring and Recovery Attorney with Unique Primary Experiance in Chapter 11 United States Bankruptcy Cases
Verified
Generally, I would say that you own the vehicles, not the corporation. Neither your partner nor the corp would be entitled to any proceeds if they sold.

The corp owns the bank account and if it were liquidated, the proceeds after payment of creditors would go to the shareholders.

However, before we get this finally answered, let me ask a few questions.

The vehicles are in your name. Is there still a bank note on the vehicles or do you own them outright? If there is a note, who pays it-- you or the corp?

Does the corporation pay you anything to you for using the vehicles? Or do you just let it use them?

When the rental income comes into the corporation, is it just used for corp expenses and then paid out to you and him as salary or equity distribution?

The reason I'm asking is that there clearly are some unwritten understandings between you and the corp such as: (1) you let the corp use the vehicles (to rent to customers) without charge; (2) I would say you have a claim against the corp for the use of the vehicles; however, maybe that is implicitly your equity contribution; (3) if the corp is paying the note on the vehicles, it would theoretically have a claim against you to the extent the paydown of the note benefits you personally; (4) do Items 2 & 3 wash?

Also, is the company 50/50 or something else? Do you have a shareholders agreement (an agreement regarding what happens if one of you gets a divorce, files bankruptcy or just simply wants a division of the company -- i.e. a buyout provision) in place?

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Customer reply replied 5 years ago
Generally, I would say that you own the vehicles, not the corporation. Neither your partner nor the corp would be entitled to any proceeds if they sold.

The corp owns the bank account and if it were liquidated, the proceeds after payment of creditors would go to the shareholders.

However, before we get this finally answered, let me ask a few questions.

The vehicles are in your name. Is there still a bank note on the vehicles or do you own them outright? If there is a note, who pays it-- you or the corp? The vehicles are paid off. However, they were paid off by the corp. Payments came out of corp bank account.

Does the corporation pay you anything to you for using the vehicles? Or do you just let it use them? I just let corp use them.

When the rental income comes into the corporation, is it just used for corp expenses and then paid out to you and him as salary or equity distribution? That's correct. When there was payments on said vehicles, corp made payments. Then there would be quarterly distributions.

The reason I'm asking is that there clearly are some unwritten understandings between you and the corp such as: (1) you let the corp use the vehicles (to rent to customers) without charge; (2) I would say you have a claim against the corp for the use of the vehicles; however, maybe that is implicitly your equity contribution; (3) if the corp is paying the note on the vehicles, it would theoretically have a claim against you to the extent the paydown of the note benefits you personally; (4) do Items 2 & 3 wash? Basically, the answer is yes.

Also, is the company 50/50 or something else? Do you have a shareholders agreement (an agreement regarding what happens if one of you gets a divorce, files bankruptcy or just simply wants a division of the company -- i.e. a buyout provision) in place? The corp is 50/50. The buyout agreement is 50/50 of what the corp owns. Which is basically a bank acct. Correct?
Reason for the question is my partner has embezzled funds from the corp. Aside from pressing charges, which I would rather not do, just looking for options to protect myself in a lawful manner. Suggestions?
The problem with the exactly 50/50 arrangement is that neither of you can take any corporate action without the other. I asked about the shareholder agreement because it can be used in the events of this kind of tie. However, it sounds like it is 50/50 and there is no shareholder agreement.

I do handle situations like this alot. You really should locate an attorney to guide you through this situation.

It sounds like, however, you own the vehicles. Maybe the company has some claim against you for reducing the debt, but you would argue that it is offset by the contribution of the vehicle use.

However, if the company is 50/50, who is going to authorize the company to sue anyone (to sue either you or to sue your other shareholder).

I'm guessing your plan is to take the vehicles and walk away from the company and leave it at that. I can't immediately say that that is a bad strategy. However, check with your attorney to make sure.

Let me know if I can answer any further questions!
R

grantlawpc
grantlawpc, Attorney
Category: Business Law
Satisfied Customers: 31
Experience: Business Restructuring and Recovery Attorney with Unique Primary Experiance in Chapter 11 United States Bankruptcy Cases
Verified
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So where is your relationship with your partner. Have there been any development?

R

grantlawpc
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grantlawpc
grantlawpc
grantlawpc, Attorney
Category: Business Law
Satisfied Customers: 31
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Experience: Business Restructuring and Recovery Attorney with Unique Primary Experiance in Chapter 11 United States Bankruptcy Cases

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