My wife and I own an S Corp. Recently in Couples Councilling I agreed to a list of job responsibilities that she said she would perform. Although we both own 50% of the shares this work load has her performing way less then that per cent of the work. Lately she does not even do that and often what she does do is not done with the procedures we have in place followed. Not performing her work load on time is having a negative impact on sales as the items cannot be listed for sale until she completes her part. Not following the procedures is not only jeopardizing our reputation with our customers but causing us to have to incur additional costs ( ie return shipping). What are my options? If she was an employee should would be fired.
Before I respond to your inquiry, I must state that we have not spoken, I have not reviewed the relevant documents and facts, and I do not represent you. Therefore, my discussion below is not a legal opinion, but is informational only. Finally, my discussion applies only to issues to which Pennsylvania, Delaware, New Jersey or Federal law applies, unless otherwise specified.
That being said, you have the classic problem of an equal partnership - when one partner fails to do their job, the other partner is left with problems they cannot easily rectify. As an S Corp., you can both be employees; if you are the President, you can terminate her employment. She will still own 50% however. You can offer to purchase her 50%, or have her give it to you so you can run the business yourself. You can dissolve the company and start a new one that you own by yourself. Not all of these options may be workable in your situation; you should speak to a business attorney AND to a family law attorney about how they will impact you.
If you would like to discuss this matter further, please feel free to contact me at the below address(es) or telephone number.
/Christopher E. Ezold/
The Ezold Law Firm, P.C.
Employment, Business and Health Law
One Belmont Avenue, Suite 501
Bala Cynwyd, PA 19004
Answered 8 months ago. Before I respond to your inquiry, I must state that we have not spoken, I have not reviewed the relevant documents and facts, and I do not represent you. Therefore, my discussion below is not a legal opinion, but is informational only. Finally, my discussion applies only to issues to which Pennsylvania, New Jersey or Federal law apply, unless otherwise specified. /Christopher E. Ezold/ The Ezold Law Firm, P.C. One Belmont Avenue, Suite 501 Bala Cynwyd, PA 19004 (610) 660-5585 Cezold@Ezoldlaw.com www.ezoldlaw.com
I think my colleague spelled out some clear options for you here. It is always best to memorialize everything in writing such as a proper shareholder agreement where certain obligations and/or restrictions can be delineated.
Another option is to hire someone to handle the work that is not being done. As a 50% owner you have a right to do that.
If you believe the marriage is at a crossroad, you need to speak with your own family lawyer to help create a strategy that best protects your interests. But as noted, you may want to buy her out now.
Most of us here, including myself, offer a free phone consult.
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