Legal Question in Business Law in California

My wife works at a small clothing store consisting of the owner, and about 5 employees, and she has worked there for three years. The bus is declining, and the owner owes about 50k to the feds, and just isn't the greatest boss/ owner etc. The other day (DEC 30th), the owner passed out "shares"...certificates along with a letter stating that my wife and the other employees as of now are owners of the company. My question that legal? Doesn't there have to be an agreement made, or can she really do that?

Asked on 1/06/15, 3:35 pm

3 Answers from Attorneys

Frank Natoli Natoli-Legal, LLC

What? No, that's not how it works. My instincts tell me there may be more to the story, maybe something your wife forgot or overlooked? I mean, that just does not make any sense. Why would anyone willingly take on the responsibility of a failing entity?

I don't really think there is any way in which your wife could be in harms way here outside of losing her job or maybe some pay, but if you guys have serious concerns I would discuss it over in more detail with a lawyer in private.

All the best,


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Answered on 1/06/15, 4:35 pm
Edward Hoffman Law Offices of Edward A. Hoffman

I share Mr. Natoli's concerns.

It sounds like the owner is trying to set up your wife and the other employees, so that when the store and/or the owner are sued they can claim the employees are liable. How plausible that argument would be will depend on many factors, including whether the business is a corporation, an LLC, etc., and how much control the employees exercise. But even if the claim is doomed to fail (which it might not be), you and your wife would likely have to spend time, effort, and money fighting it.

This might not be what's happening, but it's a very real risk. You should consult with a local attorney about your rights.

Good luck.

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Answered on 1/06/15, 5:14 pm
Charles Perry Law Offices of Charles R. Perry

If the shares are truly a gift, your wife can decline to accept, just like any other gift.

If the shares are intended to be in lieu of wages, the situation gets a bit stickier. You would need a consultation to ensure the wife could refuse the share and demand cash instead.

You do not confirm whether the company is a corporation, an LLC, or simply a DBA name. As such, it is not possible to say much else. I strongly suggest your wife meet with a plaintiff-side employment lawyer for assistance. You may be able to group together with the other employees to share any fees and costs.

This situation is highly irregular, in any event.

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Answered on 1/06/15, 11:30 pm

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