• FreeAdvice has a new Terms of Service and Privacy Policy, effective May 25, 2018.
    By continuing to use this site, you are consenting to our Terms of Service and use of cookies.

Shareholder Property rights in an S Corp.

Accident - Bankruptcy - Criminal Law / DUI - Business - Consumer - Employment - Family - Immigration - Real Estate - Tax - Traffic - Wills   Please click a topic or scroll down for more.

barryjhealy

Junior Member
Live in South Dakota. Have a question about the actual right to exert ownership rights on property that one is a shareholder of. Property is owned by a S-Corp and a shareholder is trying to say that he owns property that has been deemed fit to be demolished due to liability concerns. Property is rented out and a majority of the shareholders as well as Directors feel it to be a huge liability due to its dilapidated condition. They have filed a cease and desist order to try and stop because they state that they own an interest in the property and according to SD law it takes approval of all interested parties to proceed. Is this right?
 


LdiJ

Senior Member
Live in South Dakota. Have a question about the actual right to exert ownership rights on property that one is a shareholder of. Property is owned by a S-Corp and a shareholder is trying to say that he owns property that has been deemed fit to be demolished due to liability concerns. Property is rented out and a majority of the shareholders as well as Directors feel it to be a huge liability due to its dilapidated condition. They have filed a cease and desist order to try and stop because they state that they own an interest in the property and according to SD law it takes approval of all interested parties to proceed. Is this right?
If I understand you correctly an S-corp owns a property that is in such bad condition that the majority of the shareholders feel it should be demolished. One shareholder however is against that and believes that his ownership of shares in the corporation makes him a direct owner of the property?

If that is the case he is wrong. Are we talking about an actual cease and desist court order?
 

barryjhealy

Junior Member
If I understand you correctly an S-corp owns a property that is in such bad condition that the majority of the shareholders feel it should be demolished. One shareholder however is against that and believes that his ownership of shares in the corporation makes him a direct owner of the property?

If that is the case he is wrong. Are we talking about an actual cease and desist court order?
This has actually gone further than a cease and desist order from the shareholders attorney. He has now filed a injunction from the Supreme Court where a ownership case is properly presented before them and being put on the docket for review. This is ugly and very complicated but I was trying to reassure myself that "shareholders" dont actually have private property rights when dealing with an S-Corp.
 

barryjhealy

Junior Member
But can one say that they have rights when dealing with property other than shareholder rights. From what I have researched a shareholder has rights to dividends and equity, not ownership rights.
 

justalayman

Senior Member
But can one say that they have rights when dealing with property other than shareholder rights. From what I have researched a shareholder has rights to dividends and equity, not ownership rights.
As Quincy stated, an s-Corp can distribute ownership interest in a property if they so choose. If the s Corp retains some ownership interest it is co owned by the s Corp and the individual
Holding shares in the s Corp itself does not give one individual ownership of property owned by the s Corp.

So figure out your situation. Nobody here can tell you what your s Corp owns and whether this guy has any individual ownership in the real estate.
 

LdiJ

Senior Member
As Quincy stated, an s-Corp can distribute ownership interest in a property if they so choose. If the s Corp retains some ownership interest it is co owned by the s Corp and the individual
Holding shares in the s Corp itself does not give one individual ownership of property owned by the s Corp.

So figure out your situation. Nobody here can tell you what your s Corp owns and whether this guy has any individual ownership in the real estate.

I am sorry but I think that you and Quincy are confusing the issue here. There is no indication that the S-corp has distributed the property in question to the shareholders. In fact, it appears quite clear that the S corp owns the property. Therefore its irrelevant that an S-corp may distribute property if it's board of directors chooses to do so.
 

quincy

Senior Member
I am sorry but I think that you and Quincy are confusing the issue here. There is no indication that the S-corp has distributed the property in question to the shareholders. In fact, it appears quite clear that the S corp owns the property. Therefore its irrelevant that an S-corp may distribute property if it's board of directors chooses to do so.
LdiJ, nothing is "clear." That is why there is a court action over the ownership of the property.

Please do not make corrections to information that is not incorrect.
 

LdiJ

Senior Member
LdiJ, nothing is "clear." That is why there is a court action over the ownership of the property.

Please do not make corrections to information that is not incorrect.
There is NOT a court action over the ownership of the property. There is a court action attempting to stop the demolition of the property. The plaintiff is attempting to assert an ownership interest in the property via his/her share or shares in the S-corp, as a hail mary to try to stop the demolition. So again, the fact that the S-corp may distribute property is irrelevant.
 

quincy

Senior Member
A cease and desist order is a court order and seeking an injunction is a court action.

LdiJ, you cannot know what is relevant and what is not unless you know far more than what has been posted here. You know NOTHING about ownership interests in the property.

Barry will need to have the specifics personally reviewed by a legal professional in his area.
 

LdiJ

Senior Member
A cease and desist order is a court order and seeking an injunction is a court action.
Well, you clearly only read the first sentence of my post, because I did not disagree that there is a court action going on here. I just disagreed about what type of court actions is going on.

LdiJ, you cannot know what is relevant and what is not unless you know far more than what has been posted here. You know NOTHING about ownership interests in the property.

Barry will need to have the specifics personally reviewed by a legal professional in his area.
No, I do not. However my position on this thread is much closer to reality than yours is. So, I am going to agree with you that Barry needs to have a local attorney review things.
 

quincy

Senior Member
You cannot say that what you said is "closer to reality" when the reality of the matter is not known.

Unbelievable.
 

LdiJ

Senior Member
You cannot say that what you said is "closer to reality" when the reality of the matter is not known.

Unbelievable.
No quincy, you are the one who is unbelievable. There are reasons why people put real estate into business entities such as LLCs and S-corps. The odds of them distributing that real estate back out of the entity, to the shareholders is incredibly remote unless they are actually closing down the entity AND want to keep the property. Since the majority of the shareholders of this property want it demolished, clearly they are not going to want the personal liability of having the property in their personal names.

You only brought up the fact that an S-corp is allowed to distribute property because you wanted to disagree with me and had nothing else to pick at on this thread. Please stop, you are doing a disservice to the posters.
 

quincy

Senior Member
Again, you are assuming facts that have not been presented.

I have no desire to, and do not look to, disagree with anyone. But if what someone writes starts to get creative with the facts and draws conclusions from these creations, I have no problem pointing it out.

If it seems that I am (and many others are) singling you out, perhaps you might want to look at what you have been posting.
 

justalayman

Senior Member
What I said and I presume Quincy intended was to clarify that the Corp CAN distribute property to an individual. Apparently the other party believes somewhere and somehow that is what has happened. Whether it has or not is something the op and Corp and whoever needs to know will have to discover through the current court action.

Nobody here knows the terms of the financials of the Corp and it’s shareholders. That is something the op and all those involved will figure out in court.
 

Find the Right Lawyer for Your Legal Issue!

Fast, Free, and Confidential
data-ad-format="auto">
Top