Being sued by partner in S-Corp.

[ineedadvice88]

State: GA
S-Corp of 4 equal partners.
One partner (let’s call him 4th partner) owned a business (let’s call it bus. A) prior to entering into the S-Corp. The previous owner of bus. A sold bus. A to 4th partner through owner finance for around $60K . After a few months of operation, S-Corp decided to purchase bus. A by taking over payments of owner-financed loan. All partners attempted to have their names added to loan. However, previous owner did not agree to add the other 3 partners to the loan. So, 4th partner is only name on the loan even though S-Crop now owns bus. A. 4th partner also applied for credit cards for S-Corp in his name which now has around $16K balance. Now, 4th partner has since left S-Corp for a new job but vowed to continue working as much as possible which ended up being NEVER. So, S-Corp decided to take 4th partner off payroll and make him merely a stockholder. 4th partner did not like this so is now planning to sue S-Corp for back pay when S-Corp could not make payroll due to lack of funds and sue to have all debt removed from his name even though S-Corp is still making payments on loan and credit cards. One credit card payment (in 4th partner’s name) was late because S-Crop refused to make the payment due to all charges being personal charges of 4th partner. We have recently discovered S-Corp has been paying these monthly personal charges for over a year now.

1. Does 4th partner have a legal stance on back pay issue even though none of the partners have been paid for those pay periods?

2. Can other 3 partners be held personally liable for loan of bus. A if S-Corp fails to succeed?

3. Can other 3 partners be forced to take on debt of bus. A loan thus removing debt from 4th partner?

 

[loku]

DOES 4TH PARTNER HAVE A LEGAL STANCE ON BACK PAY ISSUE EVEN THOUGH NONE OF THE PARTNERS HAVE BEEN PAID FOR THOSE PAY PERIODS?
Your liability for back pay to a partner depends on the provisions of the Articles and bylaws that relate to partners’ pay. If the articles and bylaws are silent, then it depends on any agreements you had. It also depends on what you mean by “pay.”

If there were no agreements, then if the company gave none of you a salary for the pay periods in question, then the other partner would certainly not be entitled to a salary for the period. If the policy of the company has been to compensate the partners for the time the spend working, then also, partner 4 would not be entitled to any salary.

Partner 4 is however, entitled to a share of the profit or loss, after all expenses.


CAN OTHER 3 PARTNERS BE HELD PERSONALLY LIABLE FOR LOAN OF BUS. A IF S-CORP FAILS TO SUCCEED?
Partner 4 is personally liable for those loans so that if there is a default, the creditors would go against Partner 4. But in that case, Partner 4 could sue the rest of you for your shares.

CAN OTHER 3 PARTNERS BE FORCED TO TAKE ON DEBT OF BUS. A LOAN THUS REMOVING DEBT FROM 4TH PARTNER?
Probably.