AboutTimmy Chou Expertise I am a experienced Mediator and a partner in a management consulting firm. As a mediator I work as a third-party neutral and specialize in partnership/shareholder disputes, management/labor issues, company culture difficulties, and family-owned business problems. I can help describe why alternative dispute resolution may be a good choice for you. As an experienced management consultant I may be able to offer creative ideas to help resolve your organizational and business problems and disputes. "If you say conflict, I say opportunity".
Question QUESTION: Me and my husband are 7.5% each owners of a business that our partners made a corporation We submitted our resignations letters releasing us as board of directors of the corp. Does that relinquish our right as the 7.5% ownership each of us has as well.
ANSWER: Thank you for your question!
As I always note to questioners, mediators act as neutral third parties to disputes and never "get involved" in judging the merits of conflict, but merely use special techniques to help the parties decide how to negotiate their own settlement.
Shareholders in a corporation elect Directors to govern the management of the Company. Directors are supposed to be advocates of the Shareholders and act in the corporation's best interests. In large or publicly traded companies, a certain percentage of the Directors are required to be independent. Directors then hire a management team (Officers) to actually run the company in exchange for compensation.
Your status as an officer or a director is unrelated to your shareholder status. You have earned your shares and they are yours to keep. You would only want to relinquish (sell) your ownership shares for consideration or cash.
Feel free to follow up with additional questions.
For your information, the pros and cons of the types of dispute resolution methods follows.
GOOD LUCK!
Arbitration, Mediation, and Litigation
Arbitration: the referral of a dispute to one or more impartial persons for final and binding determination outside of the judicial system
Benefits of Arbitration:
Confidential, no public record
Limited exchange of documentation, information
Quick, don't have to wait for a court date
Arbitrators have expertise in the subject matter and are trained in conflict resolution
Cheaper than litigation
Preserves business relationships
Negatives of Arbitration
It's a compromise, no 100% winner
Complex arbitration can be costly
If not satisfied, may litigate the arbitration procedure
Poor results with an unskilled arbitrator
Both parties must agree to cooperate in the process
Mediation: the process by which parties submit their dispute to a neutral third party (the mediator) who works with the parties to reach a settlement of their dispute.
Benefits of Mediation:
Neutral mediator can objectively suggest alternatives not considered before
Parties are directly engaged in negotiating the settlement
Can be quicker than litigation
Less costly than litigation
Preserves business relationships
85% of American Arbitration Association cases mediated find successful solutions
Negatives of Mediation
may not reach a binding decision
unskilled mediator
Litigation: using the judicial system to resolve disputes
Benefits of litigation:
a clear winner and loser
uses a prescribed set of procedures
more predictable outcomes
is final
Negatives of Litigation:
waiting for court dates can do more harm
usually more expensive than mediation and arbitration
part of the public record
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QUESTION: To add to my previous question, we are legally still shareholders then. If they are Behind in Federal and State Taxes and they want to hold us accountable for 15% of the back taxes can we trade them our shares in exchange for the back taxes or is that a agreement that we all need to agree to? They are still running the business under same name and tax id # and we do not want to be held liable for taxes accrued after our resignation to the corporation. Can they hold us liable for them and also if they take us to court for the loss the business had last year how can they hold us liable to pay 15% of that or can they? I sure appreciate your help on the previous Question.Thank You!!!!
Answer Yes, you are still shareholders.
Typically a shareholder is not personally liable for corporate taxes. You are not liable for this or any portion.
However, if you changed from a partnership or LLC you MAY have some personal liability.
First off, the IRS will not categorically honor any agreement where you sell or trade your "liability" to the company. Don't believe anyone who tells you that is true (unless somehow the company generates cash and pays the arrears in full). The IRS will look first to the business "control" persons (that operate the business and control the money), next to the Officers and Directors, and then finally to the Partners (but only if they were active partners and knew or should have known about the mismanagement).
If you were a limited partner (you did not have control of the company's operations or funds) you are unlikely to be held accountable. The people that were managing the business and were responsible to pay these taxes will be the first ones in line to answer.
Also, as long as you did not lie cheat or steal no one can sue you for business loss.
Please get some legal advice. You can call your local Bar Association office, who will refer you to a lawyer for free.
