Q: In an S Corp, 50/50, losing money, only I believe the firm must stop operations and let go of employees. How do I remove
...remove myself from the liabilities incurred by the other party if he continues without my agreement, before the formal dissolution?
A:
In a 50/50 S Corporation where you and your partner disagree on the future of the company, it's important to protect yourself from potential liabilities if your partner continues to operate the business without your agreement. Here are some steps you can take:
1. Consult with a business attorney: Seek legal advice from an experienced business attorney who can guide you through the process of protecting your interests and limiting your liabilities.
2. Review your operating agreement: Refer to your company's operating agreement to understand your rights and obligations as a shareholder. The agreement may outline procedures for resolving disputes and the process for a shareholder to exit the company.
3. Formally express your disagreement: Send a written notice to your partner and the company, expressing your disagreement with continuing operations and your desire to dissolve the company. Keep a record of this communication.
4. Resign from your position: If you hold any officer or director positions, submit a formal resignation letter to protect yourself from future liabilities arising from your partner's decisions.
5. Stop participating in the business: Refrain from taking part in any business activities or decisions to demonstrate that you are no longer involved in the company's operations.
6. Negotiate a buyout: If possible, try to negotiate a buyout of your shares by your partner or a third party. This can help you exit the company and limit your future liabilities.
7. Initiate formal dissolution: If your partner refuses to cooperate, you may need to initiate formal dissolution proceedings through the courts. Your attorney can advise you on the appropriate steps to take based on your state's laws.
Remember that the specific actions you should take depend on your unique situation and the laws of your state. It is crucial to work closely with a qualified business attorney to ensure that you protect your interests and minimize your potential liabilities.
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