 Business
partners come to blows
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 Dear
Tax Talk,
I am 100 percent of a company that is doing all the work -- my customers,
vendors and accounting. But there is one other person that invested
money for me to do this. S Corp is what we have. This other person
has 100 percent of the shares and said in the first meeting we will
split the shares somehow.
Let me get to the point. One year in business now and with her
$40,000 investment I made her $50,000. Over 100 percent on her investment.
She now wants to sell me stock to get in or I will just be her employee
for a business that I built from the ground up. She just sent me
a 1099 as a CONTRACTOR! And she said she will dissolve the company
if I can't pay so much for the company to make it mine. What do
I do? She put all the tax burdens on me. And my company?
-- Irked
 Dear
Irked,
I can see that you're a little upset -- and with reason. I'm not
sure what you mean by all the tax burden is put on you. She can't
give you a 1099 for the net income of the company unless it was
paid to you. If she's trying to do this, you'll need to find yourself
a good accountant to get this straightened out.
As far as promises go, the best thing obviously is to have had
a better understanding from the beginning. Since it's obvious that
the relationship has deteriorated, your best bet is probably to
go out and start your own company with your clients and vendors.
You'll have to be careful if you have a noncompete agreement or
fiduciary duties as an officer. A noncompete agreement could prevent
you from becoming her competitor, but a good attorney may find some
holes in the agreement. An officer of a company is prevented by
state statutes from setting up competing businesses and raiding
the company of which they're an official. Again, an attorney can
help you sort this out.
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