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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12009
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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I am a shareholder of a New Mexico corporation. My 2015

Customer Question

I am a shareholder of a New Mexico corporation. My 2015 earnings due me were not paid in full. How can I sue to get the balance due me paid by this Corporation?
JA: When we are ready I'll take you to the appropriate web page.
Customer: OK
JA: Since business law varies from place to place, can you tell me what state the corporation is registered in?
Customer: New Mexico
JA: Has anything been filed or reported?
Customer: Yes, my corporate shareholder earnings were reported on my Schedule K-1 on which I paid taxes on the entire amount. The Corporation only paid me enough to cover the taxes of the FULL earnings amount reported on the K-1.
JA: Anything else you want the lawyer to know before I connect you?
Customer: There are two Corporate Directors. One of them authorized a full 100% disbursement of my earnings. The other Director chose to distribute only 40% of the earnings to me as shareholder.
Submitted: 8 months ago.
Category: Tax
Expert:  Lane replied 8 months ago.

Hi. My name's Lane. I can help here.

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First, who has control (more than 50% ownership) ... another question is what do the bylaws of the Corporation say ... another question would be whether this is a true corporation with by-laws or an LLC (wich uses operating agreements rather than by-laws) which has simplky elected a corporate form of taxation

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let me know and we can go from there

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Sorry, I see now that you said K-1, so we're talking S-Corp here ... BUT the question remains (was this a Corporation at the state level) that then elected S-Corp taxation or was it an LLC.

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You ave a right of inspection under state law t see the by-laws (or operating agreement whichever applies)

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BUT it's VERY possible that these two individuals constitute control (more than 50% ownership) OR that one has more authroity given the officer title.

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This is one of the bigger "gotcha's" for S-Corp passive investors ... there is nothing in the statute law that says they have to distribute. In fact there are MANY that don't even distribute enoug to cover the tax liability.

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If that's the situation you may have standing that they miusrepresented the responsibilities of passive shareholders

Expert:  Lane replied 8 months ago.

Be glad to make a call consult offer if you'd like to discuss

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Lane

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I have a law degree, with electives in Tax Law, Estate law, Corporate law, and business planning … an MBA, with specialization in finance a BBA, and CFP & CRPS designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice, since 1986.

Expert:  Lane replied 8 months ago.

Hi,

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I’m just checking back in to see how things are going.

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Did my answer help?

If this HAS helped, and you DON’T have other questions … I'd appreciate a positive rating (using the stars or faces on your screen, and then clicking “submit")

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But again, let me know if you need more on this.

Lane