Legal Question in Employment Law in Pennsylvania
Corporate structure in a small business
I am not sure that this is a legal question, but I thought I would start in that direction. My wife is involved in a small business and recently was given the opportunity to take an ownership role. The business is incorporated as and S-corp with approximately 25 employees. Prior to having the opportunity to be an owner, she was employed by the business as a sub-contractor. Her questions is "Can she remain a sub-contractor and assume an officer/owner position with the business?"
2 Answers from Attorneys
Re: Corporate structure in a small business
The issue of ownership and employment are distinguishable. One may still be an independant contractor and an owner of an s corp. I am assuming the ownership is being offered as an incentive to charge a reduced rate for services. Make sure if you accept the ownership your rights are fully spelled out in a buy sell agreement.
Re: Corporate structure in a small business
An individual can be an owner of a business and also contract to provide serices for the same corporatin. However, as an officer and shareholder your wife would owe a fiduciary duty to the corporation and any other shareholders. Thus, any contract between her and the corporation must be fair to the corporation. There are also tax implications to this type of arrangement which should be reviewed by a tax professional.
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