Q: We have registered a S Corp. but haven't signed byLaws , form 2553, and Certificate of Secretary. Our we a legit company
We are a start up and have registered a S Corp. but haven't signed byLaws, form 2553, and also our Secretary hasn't signed the Certificate of Secretary. However, we have the IRS EIN#. Now we got to a point that we want ask our CEO who is also one of the co-fonder(20%share) to leave the company and leave the share on the table. The majority of the board member are agreed to remove him but our issue is how we can proceed based on the not completed the legal forms. He is the person who initiated the corporate registration and hasn't completed that. Now my question is what is the best move/action to handle this situation?
A:
Your question is ambiguous. The filing of Form 2553 is what registers a corporation as an S corporation. Until Form 2553 is filed, the entity is a C corporation. There is a time limit to file the Form 2553 to elect to be an S corporation.
The Board usually can elect another CEO. Usually, the corporation's secretary is the one who completes the necessary legal paperwork required. The Board can authorize the secretary to do so.
Ousting a shareholder without the By-Laws being signed is problematic. The By-Laws would be where I would look first for the procedure agreed by the parties for the removal of a shareholder. Absent By-Laws, carefully read the Texas Business Organizations Code provisions dealing with the removal of shareholders.
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