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Personal liability or corporate one?

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Metamorphoo

Junior Member
What is the name of your state (only U.S. law)? KS

My spouse and I purchased a 40% interest in an S-Corp. My sister and brother-in-law, the majority shareholders, own the other 60% interest. When we bought our interest in the company, we paid our 40% in full up front. My sister and her husband, however, had taken out a loan to purchase the company from its previous owner.

Our issue: They handle the financials, and they have claimed the loan as a corporate liability; so the company has been making the loan payments. My husband and I are not happy about this. As shareholders, we feel like we are essentially paying 40% of their loan and gaining nothing in return.

Is what they are doing legal? Can a shareholder's loan to invest in the company be regarded as a corporate liability, payable with corporate funds? Is there anything we can do at this point (we've been in the company several years), or are we stuck?
 



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