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ACS

Member
Florida

My Sister and Husband in Florida have an S Corp. They are in the service industry. Arleen told me that her husband is putting the company in a position that could bring a lawsuit. She is trying to find out how she can get out of ownership of the company thus avoid being sued.

I'am thinking Sis owning the company or not, she is still going to be partly responsible.
Thanks
 


HomeGuru

Senior Member
ACS said:
Florida

My Sister and Husband in Florida have an S Corp. They are in the service industry. Arleen told me that her husband is putting the company in a position that could bring a lawsuit. She is trying to find out how she can get out of ownership of the company thus avoid being sued.

I'am thinking Sis owning the company or not, she is still going to be partly responsible.
Thanks
**A: please explain the type of liability.
 
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ACS

Member
Thank you for your reply. The liability is possible future property damages to a building. Not doing the job correctly and knowing it.
 

JETX

Senior Member
Someone clearly does NOT understand about corporations. Corporations are NOT owned by individuals, they are owned by shareholders.

Presumably, your sister is a shareholder. As such, all she has to do is find some schmuk who will buy her shares from her.
 

ACS

Member
True , Arleen is a shareholder, and I told her to sell her company shares to the husband/partner.

If I understand, the company's assests are at risk. I would think that the shareholders could be held persoanlly responsible too. How about his wife - the ex partner, she can sit back and relax after selling?

Thanks
 

JETX

Senior Member
"I would think that the shareholders could be held persoanlly responsible too."
*** Not correct unless the directors or officers conduct is in violation of statute, which could make them personally liable in a court finding.

"How about his wife - the ex partner, she can sit back and relax after selling?"
*** Yes.
 

ACS

Member
Thank you for your reply JETX,

Could you give me an example regarding "conduct is violation of a statute" for my better understanding.

Thank you.
 

JETX

Senior Member
Let me give you an example from a case I had.....
Debtor operated a family-run corporation. When a judgment was rendered against the corporation, they tried to file bankrupty. Based on the information already obtained, we were able to challenge their petition and forced them to withdraw it (as a fraudulent filing). The corporation was then simply dissolved, with a claim of no assets. We then filed a 'alter ego' suit against the individuals. In that lawsuit, we were able to show that the debtor had used corporate funds to pay his mortgage and utilities, groceries and even pay the vet bills for his dog. The court agreed that the individual had 'co-mingled' his funds to the extent that there was no longer a separate line between the corporation and the individual and made him personally liable. We then collected from him.

More on this subject of personal liabilty for corporation officers/directors can be found at:
http://www.buchalter.com/FSL5CS/articles/articles170.asp
http://www.k2d2.com/newsarchives/year2001/may01.html
http://www.michbar.org/realprop/article27-2.html
 
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