Legal Question in Business Law in New Jersey

Re: Deadlocked S-corp

Your problem is complex but not necessarily unique. The operating agreements of many closely-held businesses do not include effective dispute resolution or arbitration clauses.

It appears, however, that the process most suited to your situation would be non-binding mediation. Mediation would offer a cost-effective alternative to litigation or arbitration, and help facilitate a mutually acceptable outcome for all parties concerned.

I am a qualified mediator with substantial business experience and would be happy to consult with you on how to approach the other shareholders about the use of mediation, or to participate as a neutral for the parties.

This response is not legal advice and providing a response to an anonymous inquiry does not form a confidential attorney-client relationship. A separate engagement for legal services would be required.

Re: Deadlocked S-corp

You need separate legal counsel. A good tax and business attorney can explain the options and try to resolve the issue while keeping the business successful. Some of your choices are:

1. Having one set of shareholders purchase the interest of the other shareholders;

2. Splitting the disputed portion of the business into a different corporation and selling it while keeping the rest of the business;

3. Working on an amendment to the Shareholders' Agreement to put in a dispute resolution mechanism.

I hope this helps!

Ron Cappuccio

http://www.BusinessEsq.com