Legal Question in Business Law in California

Business Dispute

A dispute arose about 4 months ago with my partner in an S-Corp. We both own 50% of the company. To end the dispute, I gave my partner the choice of acquiring my 50% of the company (and resign my position) or dissolving the company; he chose to acquire my shares.

Reading through the ''Agreement for the purchase and sale of stock'' document (I haven't signed it yet) I was given by our corporate lawyer, one phrase jumped out at me...

''Myname also agrees to be responsible for any and all tax liabilities as a result of his ownership in CompanyName''.

My concern with this statement has to do with the vehicle I own. I bought it in 1999, but since 2000, the payments have been made out of my sales I made for the corporation.

If I resign my position with the company, will I be forced to pay taxes on the car payments? Will the corporation own my vehicle (its registered in my name)? Are there other implications I should be concerned with? Are there any other major tax implications?

I can make the entire ''Agreement...'' available if that helps. I can also provide more details if that is would be helpful.

Thanks!


Asked on 9/04/02, 7:23 pm

3 Answers from Attorneys
Timothy J. Walton Internet Attorney

Re: Business Dispute

When you ask an attorney to help with a specific factual situation, you are asking for legal advice, not legal information. The difference is that legal advice doesn't come free. Contact an attorney in your area to represent you in this matter.

Read more
Answered on 9/05/02, 11:55 am
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Re: Business Dispute

The phrase you quoted is broad enough to include quite a lot more than the automobile. Without knowing the dollar amounts in question (both the car and the business as a whole) I cannot offer an opinion as to whether the over-breadth is a dangerous trap for you, or just careless drafting.

You should at minimum get your liability capped at a fair amount, after negotiation.

I would be cautious about the role of the corporation's attorney. There is a potential conflict lurking. Since your co-owner will essentially become the company after the sale, you should view the attorney as working for 'the other side' in broad terms, and obtain your own legal advisor.

Read more
Answered on 9/05/02, 12:32 pm
David Pearson Law Offices of David S Pearson

Re: Business Dispute

To answer your question, an attorney would need to review the purchase agreement and any other written agreements between you and the company and you and your fellow shareholder. It is generally not a very smart idea to represent oneself in an M&A deal and the corporate attorney has to be neutral as s/he represents the corporation, not any individual shareholder.

Read more
Answered on 9/04/02, 8:30 pm


Related Questions & Answers

More Business Law questions and answers in California