I work at Uber for $300 a week, and I'm paying for a millionaire's taxes

[fallendown]

Yes, i know the title sounds absurd and probably sounds like something a troll would write, but it's 100% true.

 

I'm a partial owner of a S Corp that I helped cofound. (5% ownership). I used to own 40%, but I got cheated out of that because I was stupid and trusted my partner (won't go into that now.) I no longer work there.

 

Now that I'm mostly out, it's obvious that my former partner wants me out 100%.

 

This business does about $2 million to $4 million in software sales each year.

 

Last year, this business did $200,000 profit. That means, if this company distributed this profit as dividends, I should receive around $10,000 and I would have to pay around $2500 to $3000 in taxes on it.

 

If this company decides to "reinvest" this $200,000 into this company rather distribute as dividends, I will have to pay the $2500 to $3000 in taxes in any case.

Maybe it's best I was scammed out of most of my shares, because if I owned 40%, I would have to pay around $25,000 instead.

 

My former partner seems to be trying to squeeze me out 100% so he "reinvests" this money by getting BMW "company cars" for himself and his wife. He'll just do a report that he did no distributions, and I'll have little way of know otherwise.

 

I'm just tempted to hand over the remaining 5% to him, although I built up that business over 15 years. But there is a lot of property that is owned by this business. The building is worth around $1.5 million, so if it is sold, I should get around $75,000 for it. I'm just certain he'll find a way to keep that from me when that happens in any case also.

 

Not sure what to do. Your advice?

[DanZee]

Well, you need a small business lawyer who can cash you out of this company. He may take a contingency fee of 30%-40%, but he should be able to get you out with something. As for the tax payments, that's the structure of a Chapter S corporation. LLCs have a similar taxation arrangement. You needed the protection of a corporation. The IRS assumes you're trying to make a profit. But as you've found out, a company can reinvest the money and there's no profits, only taxes. There's not much you can do about that.

[Wolfshook]

I dont know how things work in your country,but in my country you pay tax only for money that you got yourself. If money goes into reinvesting,the company pays tax out of that money,since it's companys profit,not yours.

[DancingFool]

I think you need to talk to a good accounting firm and a good lawyer. Consultations are actually free. You need some serious help because your business partner is taking major advantage of your lack of knowledge in terms what he can and cannot do. Time for you to arm yourself so to speak. Also, there is no reason why you should be handing over anything. He should be buying you out if he wants to or you can offer BUT absolutely get legal help and advice before you offer anything such so you don't get run over.

[happyfrank]

Not a good idea to ever give up 5% The company can grow and be worth more. That's money you can use to work on other projects.

 

Maybe you can grow and buy the company back.

 

Talk to accounting expert and lawyer. Sounds like partner can be charged for Embezzlement. You can't simple use company funds for personal assets.

 

Good luck

[tattoobunnie]

Did you set up a separate LLP or LLC for the building, that the tech company pays rent to? Or is everything under the S-Corp?

 

Actually, you shouldn't have to pay the $2500-$3000 in taxes if it's reinvested. You should be a part of the write-offs and deductions.

 

Plus, you should really think of things you do for work or home office that you can write off.

 

He would need to send you a copy of the tax returns and K1s each time he files anyway, so you would be able to see what he is "reinvesting."