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Dimitry K., Esq.
Dimitry K., Esq., Attorney
Category: Business Law
Satisfied Customers: 41221
Experience:  Run my own successful business/contract law practice.
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I 't think I necessarily need a tax expert, I thought I

Customer Question

I don't think I necessarily need a tax expert, I thought I was on the legal expert page, but how about this, I would like to hear the tax and the legal side, will pay for both can someone facilitate that for me.
Submitted: 2 years ago.
Category: Business Law
Expert:  Dimitry K., Esq. replied 2 years ago.

Thank you for your post. Please permit me to assist you with your concerns.

I can try to help you with the legal end of your question and once I am done, and you are satisfied, I can have a tax expert further assist. Would that help? Please advise. If yes, what is your question, please?

Customer: replied 2 years ago.
The tax person answered, I'd like the legal end now - I am in a corporation, Washington State, I am a 49 percent shareholder, other person is a 51 percent shareholder, originally an individual, now it is the individual's daughter as DPOA that is in charge. Both of us, the original incorporator and I, are officers, they are the sole director for the corporation, now it is the daughter. They both are using the corporate bank account as their private bank, they funnel money in to the corporate bank account to pay the father's personal bills, and then I am supposed to do all the bookkeeping for this, make out the checks and take care of thesse personal bills. In addition, they have been insisting on not running a payroll on our employees, paying them cash checks - not taxes withheld, refused to pay payroll taxes, state and federal, and on top of it all, they have an attorney and while they participate in the administration of this business, now they are demanding all manner of things, including that I help them deal with the corporate taxes and the father's personal taxes which the daughter refused to take care of last year. In addition the daughter is mad b/c I started running a real payroll, and I also insisted on paying this year's payroll taxes. To date I have spent over eight thousand dollars in legal fees to have my attorney talk to the daughter's DPOA attorney who is clearly trying to dump everything on me - the DPOA doesn't know what she is doing, she needs my help, but would I please terminate my contracts with the company and a consulting contract to advise the daughter - b/c the daughter doesn't believe she should have to pay for my assistance with this mess. I have spent over eight thousand dollars in three weeks b/c of this, having my attorney talk to the daughter's DPOA attorney, who is being very aggressive - in fact this last week they tried to blame me that her father's care bill was unpaid b/c I didn't pay it,, when there was a paper trail that I had handed it over to the daughter to pay a week and a half ago - trying to transition the corporation out of the personal business. I need help, can a majority shareholder overwhelm a corporation like this, do these kinds of things, what recourse does a minority shareholder have, not to mention, how do I bring to light some other problems, including that the daughter is collecting a paycheck from the corporation for doing her DPOA activities, is on DSHS welfare, while being a co-owner in a million dollar bank account with her father. Last week she demanded that I sign the certification papers so she can keep her DSHS, I did, but then I realized, wait a minute, that doesn't make sense, how are you coowner of a large bank account and taking cash checks from your father, last year while on welfare she got $5000 from him, ????
Expert:  Dimitry K., Esq. replied 2 years ago.

Hi,

That is terrible and frankly illegal. Obviously your corporation must pay proper wages and do proper withholding since otherwise it is a violation with the IRS and the state, and that can get the corporation fined, as can the officers of the corporation be potentially criminally charged as well. Now, as far as the shareholder overwhelming the corporation like this, if you do not have 'articles of operation' in place that limit or explain what the scope of duty is for each party, it may be possible (but still illegal), but you as minority shareholder can sue that party for your damages outright and hold that shareholder PERSONALLY liable for all your expenses, AND for all losses that the corporation has suffered due to their mismanagement. They ultimately owe a duty to the corporation AND shareholders, and this appears to be a fiduciary violation of that duty.

Sincerely,

Dimitry, Esq.

Customer: replied 2 years ago.
What is it I need to tell my attorney to do about this, she basically is trying to "create a good relationship" with these people, telling me to respond to their accounting requests, but I have another lawyer who has represented me in a case where I was a DPOA and he told me two weeks ago to get out of doing the daughter's DPOA work, including the bit where she is running it through the corporation. I told my present attorney this, she got it from my former attorney, but she tells me that I cannot just dump it off onto the daughter to do, that it might harm the father in some way if I don't keep processing his bills. And really she said this to me this past Wednesday, that she finally was on my side, after two weeks and a $4100 bill I have paid to her, that the daughter really is the problem that I said she was/is in the first place. The corporate papers - in a way I don't think they really do spell out responsibilities per say, or limits on what an officer does. What kind of section would I look for that would spell that out, there are the Articles of Incorporation and Bylaws. I think they are online in Dropbox Here is a link to the corporate documents: https://www.dropbox.com/sh/jluwos354yhr5kb/AACaU_zS3viHB5wvbghD32Jba?dl=0&s=sl
Expert:  Dimitry K., Esq. replied 2 years ago.

Hi,

Generally the information would be listed in clauses that list 'scope' or 'scope of duties'. Before I review your documentation please be aware that any review would now be beyond the scope of this question and would require additional services (and fees). I can try to answer without review, but if you want me to evaluate I would request that you would first accept the services estimate based on the size of the documentation.

Now, I have no idea what your current attorney is looking at, but any payment out of your corporation that isn't a wage or a scheduled payment, AND a payment that is not being properly reported to the state via tax purposes looks to be a fiduciary duty violation. There is also an argument that this would be a means by which the state can claim that the entity and the shareholders are the same 'alter ego', and use it as a means to pierce the corporate veil and go after the shareholders personally. On that basis it would be prudent to not pay out more unnecessary payments unless this is something that the 51% shareholder is naturally entitled to from the corporation. Keep in mind that your duty is first to the corporation, and if he is using it as a personal piggy bank you have a duty to try to stop it or at least fight it.

Sincerely,

Dimitry, Esq.

Customer: replied 2 years ago.
okay - how do I extend the payment so you can look at the documents? I get your prior answer too, I have thought this also about the whole thing about the piercing the corporate veil, that is kind of corporate 101 to not do the personal piggy bank thing with the corporate bank account and just the operation of the corporation period.
Expert:  Dimitry K., Esq. replied 2 years ago.

How many documents are you asking me to review, and approximately how many pages of items? I can then estimate and send you an additional service request. Please advise.

Customer: replied 2 years ago.
There are several copies of the corporation papers on the link I gave you, but the papers themselves do not exceed 10 pages.
Expert:  Dimitry K., Esq. replied 2 years ago.

Hi,

I will send you an additional service request. However I won't get to review until late tonight as I am about to log off for a holiday meal with my family. Please let me know if you would have questions as far as my estimate--please know that I am basing it on a review of about 10 pages worth of work. If there is more for review, I will so advise you then and would request a greater fee.

Please be well!

Sincerely,

Dimitry, Esq.