Business Law

Ask a Business Lawyer. Get Business Law Questions Answered ASAP.

Ask a Lawyer,
Get an Answer ASAP!

Business Law
This answer was rated:

A 30% owner of a small corporation has been taking his salary

partly thru a payroll service...
A 30% owner of a small corporation has been taking his salary partly thru a payroll service company but the majority of it just thru writing checks thru the check book. He said that he 1099 himself but he did this for five years. I think that it was not only wrong but illegal, was it?
Now he is talking of suing for back salary. My family owns 70% of the business, has not received any money only debt, loaned the company money & was talked into this venture by the 30% owner. Can he really get old (2003) back wages even though the company is not profitable? Thank you!
Show More
Show Less
Ask Your Own Business Law Question
Answered in 1 minute by:
8/4/2013
CalAttorney2
CalAttorney2, Attorney
Category: Business Law
Satisfied Customers: 10,244
Experience: I am a businesses law attorney, with experience advising and representing owners and investors.
Verified

Attorney William B. :

Dear Customer, thank you for choosing Just Answer. I would like to assist you with this matter.

Attorney William B. :

From your post I understand the 30% owner is claiming money as an independent contractor (using a 1099) therefore his "salary" is a matter of contract. If he does not have a written contract for salary, his claim is under oral contract, the statute of limitations for a breach of oral contract (the corporations "failure to pay him") is 2 years (he cannot claim anything older than 2011).

Customer:

When he and my father bought the business his salary was at that amount. But I was wondering since he split it up that way with 1099 & W2 did he do anything illegal?

Attorney William B. :

It was not illegal, but it may have been a violation of the corporation's governing documents, in which case he may have created an issue with his rights both as a shareholder and as an employee. (By the way, a written contract has a statute of 4 years in California, but an employee's right to wages is governed differently).

Customer:

So where would I find out about the governing documents, by laws? He is not really an employee but an owner of the business, isn't that treated differently?

Attorney William B. :

He is both an employee and a shareholder (I am speculating, but fairly certain here)l. You are entitled to a review of the books - as a 70% shareholder you will be able to get full access to the books, both the governing documents, the financial records, and the voting records, to determine what is going on with the corporation, determine what he is really entitled to, what he has been paid, and how he has been paid.

Customer:

So nothing illegal with spliting up W2 & 1099? I do have full access, he has left. Company is in debt, he ran up a pile of bills. My Dad loaned the company over $150k, and now he want to sue for back wages. My Dad passed away a few years ago & this guy ran it unchecked.

Attorney William B. :

There is nothing wrong with splitting it up. But it makes a huge difference in how he does it.

Customer:

What do you mean how it does it?

Attorney William B. :

First, there is a distinction between a W-2 employee who is entitled to protections and rights under employment law (this is actually much more of an obligation on the Corporation, and a 1099 independent contractor who is responsible for his own taxes etc. and is a contracted entity - he can only claim money owed back 2 years for oral debts and 4 years for written debts under this type of service.

Attorney William B. :

Second, he has to show that the corporation allowed the change, maybe not in its bylaws, but at least in its business records - voting records or board meeting minutes, etc.

Customer:

So he has to prove that his salary could be taken that way? He didn't put that in the board meeting records. But really started doing this after my Dad passed away.

Attorney William B. :

He needs to identify exactly what his losses were (are they non-payment of contract damages under a 1099, or are they unpaid wages under his W2 employee status).

Customer:

Thank you!

CalAttorney2
CalAttorney2, Attorney
Category: Business Law
Satisfied Customers: 10,244
Experience: I am a businesses law attorney, with experience advising and representing owners and investors.
Verified
CalAttorney2 and 87 other Business Law Specialists are ready to help you
Ask your own question now
Ask CalAttorney2 Your Own Question
CalAttorney2
CalAttorney2
CalAttorney2, Attorney
Category: Business Law
Satisfied Customers: 10,244
10,244 Satisfied Customers
Experience: I am a businesses law attorney, with experience advising and representing owners and investors.

CalAttorney2 is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

Mr. Kaplun clearly had an exceptional understanding of the issue and was able to explain it concisely. I would recommend JustAnswer to anyone. Great service that lives up to its promises!

Gary B.Edmond, OK

My Expert was fast and seemed to have the answer to my taser question at the tips of her fingers. Communication was excellent. I left feeling confident in her answer.

EricRedwood City, CA

I am very pleased with JustAnswer as a place to go for divorce or criminal law knowledge and insight.

MichaelWichita, KS

PaulMJD helped me with questions I had regarding an urgent legal matter. His answers were excellent.

Three H.Houston, TX

Anne was extremely helpful. Her information put me in the right direction for action that kept me legal, possible saving me a ton of money in the future. Thank you again, Anne!!

ElaineAtlanta, GA

It worked great. I had the facts and I presented them to my ex-landlord and she folded and returned my deposit. The 50 bucks I spent with you solved my problem.

TonyApopka, FL

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

< Previous | Next >

Meet the Experts:

Infolawyer

Infolawyer

Attorney

1,793 satisfied customers

Experienced lawyer

Dimitry K., Esq.

Dimitry K., Esq.

Attorney

1,611 satisfied customers

Run my own successful business/contract law practice.

MShore Law

MShore Law

Attorney

1,233 satisfied customers

Drafted Negotiated and/or Reviewed Thousands of Commercial Agreements

RGMacEsq

RGMacEsq

Attorney

742 satisfied customers

Licensed Texas General Practice Attorney

Barrister

Barrister

Attorney

640 satisfied customers

17 years practicing attorney, JD, BA, MBA

Ely

Ely

Attorney

564 satisfied customers

Counselor at Law.

J.Hazelbaker

J.Hazelbaker

Attorney

393 satisfied customers

Experienced and trained in the area of business law.

< Previous | Next >

Related Business Law Questions
California, privately held C Corporation, I own 100 shares,
California, privately held C Corporation, I own 100 shares, 100% ownership, of corporation and would like to issue 100 shares to my son, thus creating 50/50 ownership. What is the process (easiest) to… read more
TaxAttorneytoHelp
TaxAttorneytoHelp
Owner
Doctoral Degree
2,542 satisfied customers
Can you close an 1120S corporation and still have the
Can you close an 1120S corporation and still have the benefits of a 1033 exchange pass through to the shareholders? … read more
WiseOwl58
WiseOwl58
JD Honors Graduate
3,487 satisfied customers
I established a corporation with two friends back in June.
I established a corporation with two friends back in June. This is a California corporation. I have filed the articles of organization and the statement of information. What else needs to be done to m… read more
FLACORPLAWYER
FLACORPLAWYER
Doctoral Degree
1,750 satisfied customers
Business/corporate/NPO: do I really need 2 different
For Tina, business/corporate/NPO: do I really need 2 different entities for this? I want to start an NPO that helps handicapped and disadvantaged people travel around the country, sometimes using comm… read more
dkennedy
dkennedy
Attorney
Juris Doctorate
27 satisfied customers
Can a corporation (s-corp) registered in California have a
Can a corporation (s-corp) registered in California have a general business purpose (e.g. something like "to be involved in any lawful activity for which corporations may be organized under the Genera… read more
socrateaser
socrateaser
1,031 satisfied customers
Converting my llc business to a c corporation and looking
Converting my llc business to a c corporation and looking for a lawyer to sign the paperwork … read more
Richard - Bizlaw
Richard - Bizlaw
Juris Doctor
3,682 satisfied customers
Do all shareholders, ( 3 shareholder corporation) have the
Do all shareholders, ( 3 shareholder corporation) have the right to inspect the bank accounts? (florida corporation) … read more
Dwayne B.
Dwayne B.
Juris Doctor
28,480 satisfied customers
Is there a benefit to having a corporation own multiple
Is there a benefit to having a corporation own multiple LLCs? Or is one corporation doing multiple businesses a better way?… read more
Roy Hadavi
Roy Hadavi
Attorney
Juris Doctorate
886 satisfied customers
A CORPORATION CAN I OWN 95% of the corporation and give 5%?
i AM OPENING A CORPORATION CAN I OWN 95% of the corporation and give 5%? … read more
Roy Hadavi
Roy Hadavi
Attorney
Juris Doctorate
886 satisfied customers
My family and i have a corporation it is a s corporation we
my family and i have a corporation it is a s corporation we had a family issue in which there was a 50 50 split one member from the other side sold her shares to the other side breaking the time so th… read more
Infolawyer
Infolawyer
Attorney
Doctoral Degree
1,793 satisfied customers
IS A "C" CORPORATION REQUIRED TO HAVE AN OPERATING AGREEMENT
IS A "C" CORPORATION REQUIRED TO HAVE AN OPERATING AGREEMENT WITH ITS SHAREHOLDERS OR OFFICERS?… read more
TaxAttorneytoHelp
TaxAttorneytoHelp
Owner
Doctoral Degree
2,542 satisfied customers
Is shareholder approval required to move a corporation out
Is shareholder approval required to move a corporation out of Nevada? We did a conversion to Colorado before our new annual list of officers and directors and business license was due. I think that is… read more
Ray
Ray
Lawyer
Doctoral Degree
30,179 satisfied customers
In Colorado if an s corporation has no bylaws and there is a
In Colorado if an s corporation has no bylaws and there is a situation of possible left using a debit card by an employee and 20% shareholder does the State of Colorado use default bylaw and where can… read more
socrateaser
socrateaser
1,031 satisfied customers
Can a corporate board require shareholder participation in,
can a corporate board require shareholder participation in, and personal guaranty of, future corporate loans against the wishes of the individual shareholder… read more
TaxAttorneytoHelp
TaxAttorneytoHelp
Owner
Doctoral Degree
2,542 satisfied customers
I have a corporate entity that operates a courier business.
I have a corporate entity that operates a courier business. The only asset of the firm is trucks and contracts with customers. I want to form a separate corporate entity or LLC and transfer all truck … read more
LawGuy
LawGuy
Juris Doctor
123 satisfied customers
Amendments. Bylaws of this corporation may be adopted,
Amendments. Bylaws of this corporation may be adopted, amended or repealed by the vote or written consent of either (i) the board of directors or (ii) the shareholders entitled to exercise a majority … read more
J. Warren
J. Warren
Attorney
Doctoral Degree
2,240 satisfied customers
S-Corporation Businesses Can an S-Corporation run two types
S-Corporation BusinessesCan an S-Corporation run two types of businesses? For example can one S-corporation operate as a real estate agent and a salesman for school products.Thanks, JW… read more
Michael Gonzalez
Michael Gonzalez
JD
518 satisfied customers
My dad was a 51 shareholder in a new California corporation,
My dad was a 51 shareholder in a new California corporation, he used a buyout form to purchase for a 1 dollar the other 49 percent because the other shareholder had a difference of opinion on how the … read more
Richard - Bizlaw
Richard - Bizlaw
Juris Doctor
3,682 satisfied customers

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).

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).

Show MoreShow Less

Ask Your Question

x