QUESTION
Will this work with an s-Corp and how would profits have to be divided?
Asked on Dec 22nd, 2012 on Taxation - Oregon
More details to this question:
I am looking into purchasing a deli. The owner has an s-Corp and the goal is to make me a partner and I would assume the primary role in the business. I would run the daily business and make all decisions, pay the bills, payroll, etc. I would only be buying 25% of the business to start and would purchase more as time went on. The goal is for the current owner to become somewhat of a silent partner. He would, in the beginning, be a stay on as a paid employee but that may not continue. I would hate to put all the work in and assume all the risk to only get 25%of the profit.
5 ANSWERS
Probate Attorney serving St. Louis, MO
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Edward L. Armstrong, P.C.
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You should have some sort of security device in place to protect your interests. You need to retain counsel.
Answered on Dec 28th, 2012 at 3:41 PM
Yes this will work. It all depends on what the parties agree upon and how it is written up in legal documents.There is not one? correct way to do this.? It varies from deal to deal. I have worked in this area previously and can assist you in preparing the necessary documents.
Answered on Dec 28th, 2012 at 3:41 PM
Elder Law Attorney serving Hollister, CA
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Charles R. Perry
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You need to consult with a business lawyer to help you structure this properly. In an S-corporation, profits are held in the corporation until the board of directors declares a dividend. I assume that all shares are common stock.
Answered on Dec 28th, 2012 at 3:40 PM
Appellate Attorney serving Grosse Pointe Farms, MI
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Musilli Brennan Associates, PLLC
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You need to see a business attorney to discuss the buy in plan, to get it in writing. This is not a casual undertaking.
Answered on Dec 27th, 2012 at 11:42 PM
Tax Attorney serving Portland, OR
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Bullivant Houser Bailey PC
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In your case, I would ensure you are getting a good salary before the 25%/75% and/or get an option from the outset to buy the remaining 75%.
Answered on Dec 27th, 2012 at 9:57 PM