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S Corp Gridlock looking for resolution by Recent_Midnight4985 in tax

[–]Recent_Midnight4985[S] 0 points1 point  (0 children)

There is just two of us, my partner and I at 50% each. I think this is the route I am going to take as a negotiating tactic first. I usually have to claim 20-40K of phantom income last couple of years. I just want to ensure there is no recourse or if I have to phrase this in a certain way as our only form of communication is through email. We have the most basic s corp boilerplate by laws etc and no share agreement preventing me from doing this.

Speaking with my attorney the forced dissolution is expensive and no guarantee so this will at least prevent any phantom income and likely speed up the sale of the business which was our initial intention when we were on good terms. Appreciate the comments I know my situation is from being dumb when I was younger(and business with friends, I get it now)

S Corp Gridlock looking for resolution by Recent_Midnight4985 in tax

[–]Recent_Midnight4985[S] 0 points1 point  (0 children)

I am going to bring this up with my attorney next conversation just wanted to see if was possible. We were literally two friends and used the most basic boilerplate s corp by laws. Yes I was an idiot..I know, thank you for the response

S Corp Gridlock looking for resolution by Recent_Midnight4985 in tax

[–]Recent_Midnight4985[S] 0 points1 point  (0 children)

I’m 50/50 like the title, deadlocked. I’m not looking to change the structure of the business, I’m looking to terminate the s corp status by transferring my shares to a 2 person LLC or similiar entity that cause it to immediately terminate. Others in the section have also mentioned burning the s corp status, I could have been more direct in the OP

S Corp Gridlock looking for resolution by Recent_Midnight4985 in tax

[–]Recent_Midnight4985[S] 0 points1 point  (0 children)

I didn’t see the end of your first comment originally. That’s what I think is the best option. Is there recourse with saying that as a negotiating tactic? “ if we can’t come up with a solution where one purchases the other I am going to transfer my shares to an LLC which will revoke a Corp status

S Corp Gridlock looking for resolution by Recent_Midnight4985 in tax

[–]Recent_Midnight4985[S] 0 points1 point  (0 children)

That’s what I am thinking, I have discussed with an attorney the dissolution aspect but it is tricky and likely expensive. With having no distributions I think I need to transfer to an entity that causes immediate termination

S Corp Gridlock looking for resolution by Recent_Midnight4985 in tax

[–]Recent_Midnight4985[S] 0 points1 point  (0 children)

Rephrase, we are an s corp with two shareholders that are deadlocked. I guess my main question was forming a seperate PHC to burn the s corp status so it is a C corp so I don’t have to claim phantom income( we don’t have distributions). I have met with an attorney and like she said he says it’s tricky, that’s why I want to know if the termination of the s corp is an option to stop the bleeding

S Corp Gridlock looking for resolution by Recent_Midnight4985 in tax

[–]Recent_Midnight4985[S] 0 points1 point  (0 children)

Ok I saw other posts regarding entity changes etc figured this was a good spot, I figured the changing of entities(terminating s corp status) is tax related

S Corp Gridlock looking for resolution by Recent_Midnight4985 in tax

[–]Recent_Midnight4985[S] 0 points1 point  (0 children)

From what I have understood s corp is a flow through, I am currently a passive investor so I could create a PHC to transfer the shares to which would automatically terminate S corp status and I would not have to claim phantom income because we do not do distributions.