Legal Question in Business Law in California

I'm a partner in an S-Corp and my partner (there is only two of us) wants to leave. The company has purchased gear over the last five years. Do I have to pay him half of the full retail amount of when we bought the gear or half of a depreciated value?

Asked on 12/17/18, 11:16 pm

1 Answer from Attorneys

Bryan Whipple Bryan R. R. Whipple, Attorney at Law

First, corporations don't have partners in the technical sense ...... that's only partnerships. You are a shareholder, and you probably also have some contractual duties in connection with the corporation or your co-shareholder. How is the ownership divided? Do you each own half of the equity? There isn't any "have to pay" rule written into corporate law; it'd be whatever the two of you had agreed upon, or absent any express or implied agreement, if the matter went to court, a judge would have to figure out what's most fair to both litigants. Also, what does "wants to leave" really mean? Does your co-shareholder want to sell his equity interest, or stop working for the business, or both, or something else? Ultimately, most split-ups of corporate co-founders involve a negotiation of some kind between them if the business has some value; if not, often one co-owner will just bail. If the business has some value, I'd suggest taking the books to a lawyer and paying for some professional advice.

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Answered on 12/19/18, 3:56 am

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