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we own an s corporation in New York State. We are co ...

Customer Question
we own an s corporation...
we own an s corporation in New York State. We are co directors. If one of us is sued personally, is our corp held liable for judgement? Do we need to transfer ownership to the unsued partner?
Submitted: 9 years ago.Category: Tax
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2/2/2008
Tax Professional: RD, Certified Public Accountant (CPA) replied 9 years ago
RD
RD, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 8,784
Experience: CPA, MBA, Over 10 yrs of experience in tax planning and business consulting..
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If one of you is sued personally, the corporation is not liable for the judgement. In the even that that person is not able to satisfy the judgement from his personal sources, this ownership to the extent of his share may be at stake.

 

 

Let me know if you have any question.

 

Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.

RD
RD, Certified Public Accountant (CPA)
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Customer reply replied 9 years ago
so is it better for us to transfer ownership of the corp to the other partner? His name does not appear on the bank account for the corp.
Tax Professional: RD, Certified Public Accountant (CPA) replied 9 years ago

If you transfer the ownership just so that you can avoid the judgement than such a transfer will be questionable. You can show a sale of his share and other person buying it.

 

Let me know if you have any question.

 

Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.

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Customer reply replied 9 years ago
the trial has not started, he is a third party defendent in a negiligence case. He only received the summons at this point so there may not be any judgemnt. We want to be protected and not wait! So what should we do now?
We will accept your answer after this question. Thanks
Tax Professional: RD, Certified Public Accountant (CPA) replied 9 years ago

If there is a chance that he may be liable than you might want to consider having him sell his shares to the other person if he is willing to do that.

However, if he is not going to be liable than I would suggest to not do anything.

I would also suggest you to go to an asset protection attorney. he may advise him to form a LLC and have the LLC own the interest in S Corp....if that would help protect his interest to some extent. However, this would need information on State law and hence attorney should be able to guide you better with asset protection.

 

Let me know if you have any question.

 

Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.

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