Many times‚ I get into the technical details about New York and New Jerset minority shareholder‚ partner and member rights. However‚ after meeting with a new client this afternoon – a minority shareholder in an extremely successful New York corporation and an individual who‚ by any judge of character‚ is an honest and hard working individual – I was left with a number of thoughts (prompted by this individuals prior experiences as to his on-going dispute)‚ that I would like to share:
Specialized Legal Representation is Important
The comment from this individual was‚ actually‚ more in line with a statement‚ to paraphrase‚ that "I did not know there were attorneys who specialized in protecting minority shareholder rights". This came up because this particular individual has been trying to settle her minority buyout for a number of years with no result. Consider that although litigation was avoided (i.e.‚ no lawsuits‚ just discussions) years have passed and no resolution has been reached.
S-Corp Tax Liability is Always a Factor
If you are a minority shareholder in an "S" corporation‚ you know what I am talking about. As an "S Corp"‚ profits of the company are directly allocated (for tax purposes – but not necessarily distributed) to the individual shareholders who must pay individual income tax on his or her percentage of the income. For minority shareholders‚ many times‚ the majority shareholders withhold distributions but even though you have not received the money‚ you must nevertheless pay taxes on your allocated portion of income. Many refer to this as "phantom income". This is a common event and something that‚ if planned out properly‚ may be dealt with by a number of legal and technical steps.
Aggressive Action Is‚ More Likely Than Not‚ More Effective.
When I say effective I mean "more effective at getting results" and "more cost effective". Although I am sometimes reluctant to emphasize this point‚ the truth of what I am about to say is proven to me to be true‚ now more than ever: "Shareholder and partner disputes devolve quickly and the most "effective" strategy for a minority or oppressed shareholder or partner is the legal protection that a lawsuit affords. I am not advocating that your dispute cannot be settled – it can‚ but you need to be aggressive up-front and to put your current and soon to be former partner on defense. This is especially true when assets are being moved or your livelihood interfered with.
LEARN MORE ABOUT YOUR RIGHTS AS A NEW YORK OR NEW JERSEY MINORITY SHAREHOLDER AND PARTNER: Order a complimentary copy of Charles N. Internicola‚ Esq's book "The New York and New Jersey Partnership Dispute Guide". In the book you will learn about a proven course of action for dealing with your dispute.