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How to remove shareholder from an S-Corp

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SusanSee

Junior Member
California. About ten years ago my partner and I, we are both nurses, bought a building that was formerly a nursing home and converted it into an assisted living. After 17 years our personal relationship went south and she asked me to move out. I did and became involved with a woman that used to work at the assisted living. Now my former partner is hell-bent on ruining my life, to the extent that I had to get a restraining order. She just went completely nuts, going into the business, running up and down the halls and swearing and threatening in front of the elderly residents. She turned off the security cameras when she realized she was being filmed giving me the finger and just in general acting deranged. Then she started taking money out of the business account at random; thousands. I couldn't stop her because her name is on the account as a shareholder.

We are trying to negotiate for her to sell me her shares (50/50) but the first draft is just completely unacceptable. She wants me to waive every protection I might have legally, e.g. can't file bankruptcy without her consent, can't sell, if I'm late on a payment to her at all she can call the note. I have to take over the majority of our joint personal debt.

I thought things were going okay but two days ago she again came into the business and was videotaped giving me the finger, yelling, talking to the employees and making accusations against me; she talked to the daughter of one of the residents and made accusations and the daughter said she was going to take her mother out of there.

I've decided if I do buy her shares I will be worse off because it gives her more means to harass me. And it would be for 17 years. I don't know what to do. I'm going to try to get another restraining order but since she is a shareholder I don't know if the judge would agree. Or can agree.

If I could just keep her away from the business, prevent her from trying to damage it's reputation, and force her to agree to how much money she will take out of the business account each month, I should be okay.

I now know things aren't going to get better with her. She doesn't care if she harms the business. She even took my dog to be euthanized to get back at me. Fortunately I was able to stop that with a few minutes to spare. I don't know what I can do legally. I can't reason with her. She has an attorney but she yells at him and tells him what she wants and he can't reason with her.

What can be done?
 


FlyingRon

Senior Member
First off, being a shareholder in the business doesn't give you the rights to enter the property, etc... they are just an equitable owner.
Shareholders have no right to bank accounts. The only reason is that you had her there as an authorized signer (which being a shareholder is neither necessary nor sufficient to qualify for).

Usually it's well advised for an group founding an S corp to have some agreement in place for buying out the shareholders and to restrain the shareholders from doing anything that could jeopardize the S corp election.
I presume you didn't do this.

You really have two options, continue to negotiate to buy her out or walk from the existing company and start a new one. Of course if you've personally guaranteed any of that corporate debt, you're still on the hook for that. Of course, you can also take action upon her for improper withdrawals from the corporate accounts.

Frankly, this is way more involved than we can deal with here. You should get yourself to an attorney.
 

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