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  1. #1
    Join Date
    Oct 2009

    Partner Abandoned S Corp


    In the case of an S-Corp, owned by two partners, one at 51% and one at 49% - the partner at 49% has completely abandoned the corporation. He did not finish projects on which he was working, causing irreparable harm to the company, losing the main client. The other partner offered to have the corp buy his shares back and release him from all liability with the company, however, the guy won't respond to phone calls, emails or certified letters. He was also asked to sign the paperwork to shut the corp down if he would not sell, and he won't respond to that request either. Basically, he has gone completely dark. Currently, he is working out of the country on a contract, completely separate from the corp in question.

    What can be done about this? Can he be forced out? We'd prefer NOT to shut the corp down and start over, as we are trying to salvage what we can, there is a new partner who will buy the shares from the corp. We aren't sure what the next steps should be.

    Any thoughts?

  2. #2
    Join Date
    Feb 2007
    Corporations aren't partnerships. Once you sell someone shares in it, you usually don't have any redress as to their performance. Given a controlling interest you might be able to convert it to an C corp and cut off dividend flow to the nonproducing partner, but frankly killing the existing corporation may be the best opportunity. Was there any contracts signed that requires certain behavior of the shareholders. Believe me when I signed into an S-corp there were. A lawyer would certainly be a good idea at this point.

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