Legal Question in Business Law in New Jersey

Re: minority shareholder leaving S corp

As with many things in law, the answer to your question depends somewhat on the specific facts and you probably should have a lawyer review your particular situation.

The general rule is that shareholders are not in a fiduciary relationship with the company or each other by virtue of their investment. Therefore, ownership by itself does not preclude ownership or a management role in a competitor. In fact, it is common practice for publicly-traded companies to own shares in their competitors simply so that they receive the other's annual reports and can attend their shareholders' meetings.

Some small corporations, however, are effectively managed by their shareholders. Although there may be a formal president and secretary, all shareholders participate in the management even though they may not have a legally-enforceable right to do so. A shareholder who acquires a business secret in that context might be found by a court to have breached a duty to the corporation if that secret is disclosed to a competitor in which that person has an interest.

So, the answer is it depends. Check with your lawyer. If you don't have one, you can contact me.

Re: minority shareholder leaving S corp

I have read what the other attorney wrote to you. I agree with John, that you absolutely need to get a lawyer to guide you. Find someone who is reasonably near you, who spends a lot of their time advising small businesses.

Good luck. you will likely have a fight on your hands to get your money out of the corporation.