Stuck between business and personal

[Edbass]

Jurisdiction

California

Hello everyone,

I'm going to try to make this story as short as possible:

I have a friend right before the 2020 Covid Pandemic asked me for help in regards to his business. He needed someone to legally take over his business because for some reason, he can't be the owner anymore. Without knowing Covid would hit, I agree to be the legally owner of his business where we did the sales contract, form a new corp, etc.

When Covid hit, the business was impacted financially so to keep the business going, my friend had to put his own personal funds into the business. So now, as I am the legal owner, the corporation/business owes my friend a huge sum of money since he inserted his personal funds into the business.

I did not like this at all because as the legal owner, the business/corporation now owes my friend a huge sum of money as filed on the tax returns. Moreover, it gave me a bad tax return since we had to file losses.

So my question is:

I want to square everything out and sell the business back to him so that I no longer am associated with the business/corporation but if I do so, on the tax returns it'll still state that my corporation owes him money. He said the only way to resolve this issue is for my business/corporation to pay him back the money that he put in during the pandemic.

Is there any other way where I can free and clear my name of the corporations/business because I don't want to be the one at risk anymore. I was thinking that I can "gift" him the business back and clear the debt that the corporation owes him but I'm not sure if that'll work.

I feel like this is a way for him to keep me here to help him longer.

If I knew Covid was coming then I would've never agreed to help him in the first place.

Thanks for the suggestions/answers.

 

[adjusterjack]

The whole deal sounds screwy and maybe illegal.

Get a lawyer.

 

[Zigner]

If things aren't illegal, then I would say that there's nothing inherently wrong with the price that your friend pays for the business being reduced by the amount he is owed.

 

[adjusterjack]

There may have been something illegal about the friend having a straw man front the business for him.

Liquor licensing is one thing that comes to mind though there may be others.

 

[army judge]

A friend won't let their friends drive when inebriated.

A REAL/TRUE friend would never ask a friend to break the law or become involved in SHADY SHENANIGANS.

That said, friend or foe, the best answer to MOST questions is NO!!!

 

[zddoodah]

right before the 2020 Covid Pandemic asked me for help in regards to his business. He needed someone to legally take over his business because for some reason, he can't be the owner anymore. Without knowing Covid would hit, I agree to be the legally owner of his business where we did the sales contract, form a new corp, etc.

For starters your reference to yourself as "the legally owner" isn't a good sign.

Second, what is the reason? Please tell me you didn't agree to this without knowing the reason.

Third, does the last part of this mean that a new corporation of which you were/are sole shareholder was started? What were the terms of the sales contract you referenced? Were you represented by an attorney in this transaction? I'm guessing you weren't.

So now, as I am the legal owner, the corporation/business owes my friend a huge sum of money since he inserted his personal funds into the business.

You being "the legal owner" of the corporation has nothing to do with it. When your friend put money into the business, did the corporation execute agreements/promissory notes to repay the money?

Moreover, it gave me a bad tax return since we had to file losses.

Who are "we"? Are you saying that you made an election to disregard the corporation for tax purposes?

So my question is

Your question calls for specific legal advice and appears to be premised on at least one misunderstanding of the law. Regardless, no one who hasn't reviewed all of the relevant paperwork can answer your question intelligently. Get thee to a local attorney for advice ASAP.