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If we were solicited to invest in a private corporation repeatedly and the President CEO is not acting as a fiduciary--recourse?

Temecula, CA |

We were asked repeatedly to invest thousands of dollars in a private corporation we were partners in by the President, who then forced us out. The money is still invested there and he shows losses every year on our K-1. We would like to get our investment out. Is that possible and, if so, how?

Attorney Answers 3

  1. Best answer

    First, since you describe a corporation and a K-1, I speculate that you are shareholders in a sub chapter S corporation, rather than a partnership or a limited partnership. Many lay people use the term partnership generically, which may have caused confusion with the other answer I read.

    In any event, just because he forced you out, in and of itself, is not a sufficient basis to get him to repurchase your shares.

    However, if you have reason to believe that he made misrepresentations to you in connection with the purchase of the shares, you may have a variety of causes of action. Nothing you have said yet suggests misrepresentation or concealment. Also, you are talking about years, so I do not know whether the statute of frauds has been violated.

  2. Your question is a little difficult to answer as the facts aren't clear. It sounds like you invested in a company and you were admitted as "partners." I would assume that's "limited partners?" And you were "forced out" -- how? Were your interests in the company terminated improperly or wrongfully?

    The first place to check is the limited partnership agreement that you hopefully have for your investment. There should be a section called "Termination of Partners" or something to that effect, and it should describe how interests are to be terminated and whether LPs have any recourse or rights to their money.

    Much will depend on the location of the company and its state of incorporation. What you may have to do is file a derivative action on behalf of the company to get an accounting of assets, assuming you're actually a LP. I'm at a loss as to understand why you're receiving K1s if you're "out" of the company.

    The foregoing is not legal advice nor is it in any manner whatsoever meant to create or impute an attorney/client relationship.

  3. Depends on your contract and what you where told. You need to see a lawyer, don't say any more in a posting.

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