An S-Corporation was formed between myself and two others with each holding 1/3 stock ownership. The officers were elected in the original formation, those being the same three owners. I was named as Sec/Treas and listed as registered agent. Subsequently, having other business interests as well, I chose to leave this corporation as a paid employee and therefore resigned my officer position and as registered agent. No stock certificates were originally issued nor were there any additional specific articles of incorporation other than those minimally required by the state. This business shortly thereafter began to experience downward trends in productivity that ultimately has threatened it's financial ability to survive. In addition, one of the two remaining owners has since left due to the business problems and conflicts with the other remaining owner. The first year after I resigned but retained my stock ownership, I received from their CPA a copy of my yearly K1 form along with a letter stating that my ownership had been reduced to just over 10.5% and that this would be my final year of ownership in the corporation. This was all fraud, as would later be admitted, though I have not pursued this matter legally since the business is doing so badly. However, the second owner to leave did sell his stock for an agreed price and claims that in this agreement it was also stipulated that a purchase of my shares would be included. I wasn't made aware of this until after he sold his shares though I would certainly have been amenable to the inclusive sale of my stocks. After this, I spoke with the remaining owner and he signed an agreement to purchase my shares but again this transaction is still forthcoming. Now, in the meantime, the business has continued to do poorly and recently I have learned that this owner has now started an LLC with another partner, using the same physical address and performing the same type of business. What I suspect is this was done to circumvent debtor liabilities attached to the still active original corporation and to divert business activities through the new LLC. To be more explanatory here the business is high precision machining and the leased equipment is in the name of the original corporation, or as far as I know it is. The customer base was and I assume still is associated with the original corporation as well as it's vendor bases. What I believe is happening is they are sub-contracting work from the original corporation to the new LLC to allow profits to the LLC while showing break evens or losses to the original corporation. Pretty long story here huh? Anyway, my questions are (1) if this is all true then would there be reason for judicial dissolution of one or both businesses due to fraud and conflicts of interest, (2) what would be the legal ramifications to the individuals should an audit discover any business activities that would be deemed 'not in the stock holders best interests' and (3) how can I force these new owners to purchase my stocks for at least the same amount as the second owner received and if that owner provides me a copy of his original stock sale and it does state a purchase of my stocks in addition to his would that transaction be null and void since my stocks were never purchased? I know, I should just hire an attorney but if they don't have the money to pay their other debts then what's the point. Although, at this point, if someone told me I had an open and shut case and either or both of these people could be personally held liable for transactions then I would pursue it.
Thanks in advance!
Brad
Thanks in advance!
Brad
