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Im currently in an s-corp with two other partners. We started

I'm currently in an s-corp...
I'm currently in an s-corp with two other partners. We started a restaurant back in 2008, but have since closed our doors. As an s-corp, we purchased a piece of property which is personally guaranteed by each partner. Currently our piece of property is not worth what we owe on it. I have a buyer who would be willing to purchase it to satisfy the note. Two of the partners want to sell, but the third partner is being ridiculous and is currently acting like a knucklehead. The two partners want to exercise our rite as a majority of the s-corp, to sell this property while the buyer is interested. Can we do this and what would be the steps necessary to make this happen.
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Answered in 1 minute by:
6/7/2013
TexLaw
TexLaw, Attorney
Category: Business Law
Satisfied Customers: 4,430
Experience: Internationational Commercial Attorney
Verified
Hi,

Thank you for your question.

Does the corporation have an "operating agreement" which all the partners signed?
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Customer reply replied 4 years ago


No Sir. You could say we did this all wrong. We never signed any by laws or operating agreement. We are all 1/3 share holders.

Thanks,

I'm going to have to look through the California Corporations Code to see what happens in this situation and I'll get back to you shortly. Please don't reply here, as it will delay my answer back to you.

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Customer reply replied 4 years ago


Hello Sir. I have not heard back from you as of yet. I had some issues with my account. I guess I asked my question as a guest, but did not realize I should have asked it as an account holder. Any word?

Hi,

I'm sorry there was a delay in getting back to you on this matter.

The law in California (the CA Corporations Code Section 1001) states that "A corporation may sell....all or substantially all of its assets when the principal terms are approved by the board, an, unless the transaction is in the usual and regular course of its business, approved by the outstanding shares."

If the sale of real estate is not in the usual and regular course of business of the company, then the shareholders of the corporation (which in this case is all three of you) means that it must only be approved by "the affirmative vote of a majority of the outstanding share entitled to vote." CCC Sec. 152.

In this case, since you do not have an operating agreement, I would assume that you all have an equal 33.3% share of the corporation and thus, it only takes the approval of two of you and you do not have to obtain the approval of the third person.

How much of the corporation's assets are tied up in the land?
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Customer reply replied 4 years ago


The property in question is the only asset left of the corporation. I don't even know if it would be considered an asset. I had an appraisal done on it and the appraised value came back at less than what we owe on it. We're upside down on it. The current interested buyer is willing to pay what we currently owe on it. I consider this a blessing at this point in time.

Are you planning on closing down the corporation after you sale this asset, or is this to use the money for operations or another asset purchase?
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Customer reply replied 4 years ago


Yes. We are planning on closing the corporation. This is the only thing left we need to get rid of to do so.

Thank you for your response.

When a corporation liquidates its assets in order to close the business, it is called a "dissolution".

Once you have sold the asset, you will need to finish "winding up" by filing a certificate of dissolution and your final franchise tax return with the state.

The dissenting partner has a right to go to the court and ask that the court stop the sale and take over the sale of assets to manage the dissolution, but the dissenting partner cannot stop it entirely, only delay it.
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Customer reply replied 4 years ago

Thank you Sir. Your help is much appreciated.

You are welcome and I hope this has helped.

Good luck with your endeavors and please do not forget to rate my answer positively so that I may be compensated for my work with you here.

Thanks,
ZDN
TexLaw
TexLaw, Attorney
Category: Business Law
Satisfied Customers: 4,430
Experience: Internationational Commercial Attorney
Verified
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TexLaw
TexLaw
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