How can I fire my husband who owns 49% of our S corp?
We have owned a business together since 1999. We have no partnership agreement. We have separated and I'm going to file for divorce this year. Problem is my husband owns 49% of the company. He has not worked for 2 years. He has not been paid, thru payroll, since 12/18. I understand that I can buy him out but honestly, that would be like paying him alimony, which if I keep the company, I'll probably have to do. I have worked untold hours for this business. Should I just sell it? I could probably get close to 2 mil. Just want to make the right decision. I am 60 years old.
You have two separate issues here. Working in the company and owning the company.
Barring any detailed operating agreement, you are not required to pay any business owner a salary. It sounds like you may work in the company AND own the company – you wear two hats… If you replaced yourself with one or two people and they performed all the necessary tasks, you wouldn’t necessarily receive a salary, but you would receive 51% of the profits – at the end of the year.
I would consult a business attorney and properly have a directors meeting and document the termination in writing. I would also inquire about how to protect your bank accounts and assets that are company owned. I may be off base, but from a bankers perspective, I think he may have the ability to withdraw funds since he is an owner.
It's best to talk thru it and put your personal “stuff” aside (if you can). Someone who owns even a few shares of a small company can make your life unbearable.
It could be worthwhile consulting a business valuation expert and business broker to see "REALLY" what you would net upon the sale of the company and make him an offer of 25% (not 49%). Many business owners overvalue their companies because they're so close to everything. Bring in some third party people for objectiveness.
Remember - CASH has an unusual way of getting someone's attention.
This sounds like a very specific situation where you should speak with an attorney. They will be able to analyze your business's worth, what you'll owe in a divorce agreement and what makes the most sense for you from a financial standpoint. I can't stress this enough. Especially since you don't have a partnership agreement with your husband. No partnership agreements mean there's a lot of grey area in terms of who's entitled to what. There may be some more wiggle room for you there from a legal standpoint since there's been no official document signed, but I don't have the law degree needed to give you useful advice on that front.
In terms of surface-level advice, I think it's important to consider your plans for your business. If you're planning to grow the business, it may make sense to buy him out and pay the alimony money per month. If you're done with your business, have had enough with the work, and want to get out, it's probably best to sell and cut your losses.
If you sell your business you will have to share with your husband i.e. you will end up paying 49% of the deal amount. This way you will lose your source of income. But, on the other hand, if you take 100% control of your business, you will have a chance to recover what you pay for getting full control of your business.
It is advisable to retain your business instead of selling it and starting a new one.