Legal Question in Business Law in Wisconsin

50/50 ownership of company

My son and I started a business. I put up the money, he put in the expertise. It was to be 50/50 ownership. Because he had previous financial problems I own all the stock in the company so as to protect it from his creditors. Im suppose to handle the finances because he is terrible with money. We have started having disagreements about how much he can be taking out of the company. While he agreed to a specific salary he now says he can't live on that and the company should give him more because he is worth more. Now he wants his 50% on paper because he says he needs to know his future is protected.

We saw his layer/friend who says that we can put his 50% into some type of trust which will protect the company from creditors. The company is an S Company. What kind of trust would this be. It still doesn't solve the problem of him constantly taking money out of the company. His lawyer says that he should get more because he is worth more. I know he is worth more, but right now the company can not afford more. I want him to have his 50% but I want to protect my investment too. HELP


Asked on 7/19/03, 4:57 am

2 Answers from Attorneys
Thomas Schober Schober Schober & Mitchell, S.C.

Re: 50/50 ownership of company

You and your son need to come to grips with how your business is to be managed. Your situation is very common.

What you need to do is have a meeting with a qualified attorney who will represent the corporation. That attorney should be directed to draft a shareholder agreement that contains provisions protecting both sides. Each of you should then take it to your personal attorneys to see what their thoughts are regarding the agreement. In this fashion, there will be no conflicts of representation.

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Answered on 7/21/03, 12:44 pm
Mark Mahoney Cassiani Law Office, Wise Shepherd Law Office

Re: 50/50 ownership of company

Hello,

There is a trust that could be used that way, but it likely would involve considerable legal expense. You would have to get more details from the attorney on how he/she intends for this to be set up. The s corporation is just a regular corporation but is taxed differently. There is no protection from creditors. The lawyer, I think, is suggesting that your son be issued stock and then the stock be put in trust. That may be ok, the devil is in the details. What if he gets stock and you disagree on things? You should keep 51% of the shares, that way you can call the shots. Your son's attorney is looking out for him. He is not the buinsesses attorney or yours. One attorney can't represent all three parties, because of conflicts of interest. You may want to get your own. Best wishes, Mark J. Mahoney

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Answered on 7/19/03, 2:48 pm


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