Legal Question in Business Law in Maryland

Re: Incorporation

A corporation, and its assets, is owned by its shareholders of the stock that it must issue. If your husband owns 100% of the stock, he has total control over the corporation. He could write a will leaving his shares to his son and nothing to you. If he dies during the marriage and leaves you nothing in his will, you will have a right to claim 1/3 of his property, but if you are divorced by then, you'd get nothing. Of course, in a divorce, you would have the right to claim your share of any marital property, which could include part of the business assets.

The best protection you have is to seek to have the shares of stock issued 50/50 between you and your husband. That would give you some control over the property. But I suspect that if you don't work in the business, or if he owned the business before you got married, he'll be reluctant to do this.

Re: Incorporation

I would advise having your husband include you as a shareholder in the S-Corporation. If your husband dies you would remain a shareholder in the S-Corporation. For succession planning purposes, I would advise that you both enter into a buy-sell agreement funded by a life insurance policy. If your husband dies the insurance company would issue you a check for which you can purchase your husband's shares. If you die, the insurance company would issue your husband a check for which he can purchase your shares. The buy-sell agreement could also apply in case of divorce; however, it would not be funded by the life insurance policy. The policy may be paid for by either the S-Corporation or by you/your husband.

Also, I would strongly recommend incorporating in Nevada for both liability and asset protection reasons(as opposed to incorporating in Maryland)! Nevada permits officers and directors to use many asset protection schemes (ways to limit your liability and your husband's liability)that other states like Maryland do not permit. I would be happy to assist you in incorporating your business in Nevada, electing closely corporation status in the state of Nevada, preparing and filing form 2253 (the Sub Chapter S election), preparing a shareholders agreement, as well as writing the buy-sell agreement.

If you have any further questions, please contact me at [email protected].

Sincerely,

Steven D. Rinaldi

Steven D. Rinaldi, P.C.

Suite 700

3 Bethesda Metro Center

Bethesda, Maryland 20814