S-Corp Value Question

[jasonjohn]

I have a few questions about a small business that I would like to get out of. I own 1/3 of the shares in our S Corp and have two other partners that also own 1/3 each. It is a family business (father and brother are the other 2 shareholders). I approached them about purchasing my third which they were not receptive to, but they wanted me to sell to another buyer (another brother) for a price that they felt was "fair" since they would be carrying the loan for the buyer. We finally agreed on a price ($50,000) which I felt was low but agreed to because I have a strong desire to get out of the business. Here's my concerns and questions: The business has been successful and it has a total stockholders equity of $263,000 ($163,000 in Retained Earnings and $100,000 in Paid-in Capital) - what rights do I have with respect to the stockholder's equity? Can I pull out my third of the Stockholder's Equity (which we have in liquid assets) and either gift my shares or sell them for a penny each? Any help would be appreciated.

 

[tranquility]

Valuing minority ownership in a closely held company is difficult. "Rights" to anything is a fairly flexible concept and there is no way for a minority owner to force anything but an accounting and, on complete dissolution, a proportional share of the proceeds.

I can almost guarantee that, if you are over a barrel and want to get out, the others know it and the offer will decrease and not increase. To put additional pressure on you, they might pass through some profits without distributing any cash to increase the problem to you. Negotiate all you want, but severe discounts is the general rule in such situations for many reasons.