Legal Question in Business Law in California

Re: Corporation, salary and walking away

Our Law Firm would need to know more about the corporation to properly assist you and effectuate your intent herein. Also, your business may qualify for special government or private sector funding that may prevent the business from needing to be dissolved, if this is a viable option for you. For further assistance, email us with your request.

Re: Corporation, salary and walking away

How does the unpaid salary compare with the amount of the unpaid principal and interest on the note? The bigger the note in relation to the salary due, the more danger in walking away.

Is the note payable to the corporation or the other stockholder? More risk in walking away if it is payable to the individual.

Who is responsible for payment of your salary - just the corporation, or did the other owner agree to pay or to guarantee it?

Does the corporation have bylaws, has it elected directors, and has it held organizational, annual or board meetings? Has it kept minutes?

You can't give someone back a part interest in a corporation if he isn't around to receive it, or if he isn't willing to accept it back.

Was your agreement with the other stockholder in writing, or oral? By the way, co-owners of incorporated businesses aren't really "partners;" that word should be used only if there is a partnership form of doing business. It could be confusing.

If you contact me with the answers to these questions, perhaps I can give you better (free) advice on what your safest course would be.

Re: Corporation, salary and walking away

There are too many uncertainties in your statement of facts to give you any definitive advice or answers. What are the terms of the Note? To whom is the Note payable, and is it payable by you or the corporation? Where is your co-shareholder? Can he be reached?

From what you have stated, the risk you may have from "walking away" is your obligation on the promissory note (if it is payable to your co-shareholder). Your co-shareholder may be obligated on the lease and, if the landlord goes after him, he may be motivated to go after you on the Note to raise funds to pay any judgment the landlord may get. (However, if you can't find him, the landlord may not be able to either.)

Please note that the foregoing is a general response to your inquiry, and is not a legal opinion or definitive legal advice. We can only give a legal opinion or definitive advice (a) after you have retained us, and (b) after we have had a chance to review all of your pertinent documentation.