QUESTION
What can I do when majority shareholders in an S Corp locks me out and company keeps posting losses?
Asked on Feb 13th, 2013 on Business Law - California
More details to this question:
I am a minority shareholder and the majority locked me out. No position on the board or as an employee. So far, they have been posting losses while taking a decent salary and bonuses. I get nothing, but when taxes come, I have to pay my share of the company's losses. I can vote, but I can't win anything. The majority (2) are personally against me. What recourse do I have? I can't afford this anymore and thinking of just giving the shares (30%) away to them... Free if I need to.
The majority will just use the company lawyer with unlimited company funds, which I will pay for in taxes too! Actually, they have 70% voting power, so a super majority.
1 ANSWER
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It is unclear what you expected as a minority shareholder, but this is precisely what you had a right to expect. You have no duty to "pay" losses unless you agreed in writing to do so (you actually receive a tax benefit for them). If you are upset with your investment, you cannot force the company to take it back but you should be able write off your losses for tax purposes.
Answered on Feb 14th, 2013 at 9:48 AM