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S Corporation

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snomom

Junior Member
What is the name of your state (only U.S. law)? NC
I am a 1/5th owner of a family company passed down from my mother. After we acquired the company, we became an S corporation about 12 years ago. At the present time, three of the owners are in a totally different financial situation than the other two. Our Bylaws state majority rules but lately the three have wanted to vote on what two of the owners consider risky investments. At this time, borrowing money for these investments requires personal guarantees which the two of us have refused to sign. It is my believe that S Corporations should require unanimous vote if one is to be personally responsible for the debt. Is it common practice for S corporation Bylaws to be changed to a unanimous vote in this instance & if so do you have any suggestions for how to go about this. I appreciate any help you can give me.
 


tranquility

Senior Member
No, it is not common practice to change the bylaws to how you suggest.

Also, it is not required to sign a personal guarantee.
 

Antigone*

Senior Member
No, it is not common practice to change the bylaws to how you suggest.

Also, it is not required to sign a personal guarantee.
One or two parties refusing to sign a personal guarantee can completely derail the loan. Many financial institutions will require anyone with 20% or more ownership to guarantee the loan. If they don't get the guarantees from each of the owners, they may not decide to grant the loan if the other borrowers are not personally strong enough.
 

latigo

Senior Member
First, you are not a “1/5th” owner of the corporation! *

Secondly, the election to have the company and shareholders taxed under Subchapter S of Title 26 of the Internal Revenue Code has nothing whatsoever to do with your questions.

However, the North Carolina Business Corporation Act, the Articles of Incorporation and the corporate Bylaws have everything to do with your questions.

I suggest that you address these issues with a North Carolina attorney practicing corporate law because you are totally at sea as to how the business functions under those laws, its particular articles and bylaws.
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[*] A shareholder of the corporation does not have a vested property right resulting from any provision in the articles of incorporation, including provisions relating to management, control, capital structure, dividend entitlement, or purpose or duration of the corporation.” Chapter 55, Section 55-10-01 (b) North Carolina Business Corporation Act”
 

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