Legal Question in Business Law in California

Re: Disolving an s corp

You either resolve the dispute with him, you sue him and the company, or you walk away from your claim. Make your choice after consulting with an attorney about the details and costs of the options.

Re: Disolving an s corp

You need legal counseling to make sure you handle this properly; there are many pitfalls. Let us know if you want our assistance for a reasonable fee.

Re: Disolving an s corp

Your question references three agreements....50/50, "paid later," and selling. Are any of these in writing? They are technically enforceable anyway, but a lot harder to prove.

Has the corporation observed formalities such as electing directors, holding directors and shareholders meetings, appointing officers and keeping minutes? If not, setting everyone's rights in order and selling the business will be more difficult.

Do your corporate bylaws address the right, or lack thereof, of either owner to be paid for services?

If you are going to sell the corporation, maybe you shouldn't dissolve it, at least not yet. The obligation to pay you for your time is probably an obligation of the corporation, not your brother personally.

The "50-50 clause" you refer to probably has only to do with ownership, and not a thing to do with the right to wages for service, but I cannot be sure from a distance.

In situations such as this, if they go to trial or are arbitrated, the judge or arbitrator will try to figure out what the parties' agreement was and enforce it, rather than trying to find the answer in corporate law statutes. So, establishing the facts will decide the outcome, not post-hoc actions like dissolving the corporation. In figuring out the terms of the agreement between your brother and you, the judge would first consider anything in writing; then give some weight to credible testimony regarding oral agreements or even just conversations you've had; and last but not without some importance, the judge or arbitrator could consider what the facts and circumstances would lead a bystander with some business experience and exercising some reason would conclude your agreement was, or might have been, regarding the disputed agreement terms.

If you want to stay out of court and maybe keep a little harmony in the family, you might ask your brother to consent to a quick and cheap binding arbitration using a business attorney in your neighborhood as the arbitrator.

Re: Disolving an s corp

Ownership of a corporation and a right to be paid for work done are completely two different things. Ownership in a corporation is expressed in the form of stock ownership. Do you own stock? Were shares of stock ever issued? My guess is that you own 50% of shares and your brother owns the other 50%. If so, you have a quagmire. A review of your bylaws would be required to see if you have a tiebreaker vote provision. Further, a review of the bylaws would be required to determine the voting required for dissolution. If you are a 50% shareholder, you do not have a majority vote for dissolution by yourself.

It also sounds like the corporation has an ongoing business (i.e. store). You likely have several legal issues to decipher. Unfortunately, there is no quick answer for you. You need to sit down with a lawyer to ascertain your rights and obligations and to plan your strategy.

With regard to being paid for your work, that completely depends on your deal with the corporation. Did you work with the understanding that the corporation was supposed to pay you a salary or hourly wage? If so, you likely have a claim. If not, you're out of luck.

We practice business law throughout Southern California. If you're interested in legal counseling, feel free to contact us anytime.