I want to buy out a 50% shareholder in an S-Corporation with no buy-sell agreement. Can I force the shareholder to sell at FMV?

First of all, a lot more information is needed to steer you in the right direction as far as what to do. You should contact a qualified attorney that specializes in business or corporate law. Is there a shareholder's agreement for your corporation? If so, there may be a clause that addresses dissolution of the company (and you could start a new one) or potentially a forced buyout. If the matter went to court, a FMV would be used by the court to determine the value of the company. Any clauses in the corporation's formation document would govern, including any arbitration clause. Disclaimer: Provision of the foregoing response does not create an attorney-client relationship, does not constitute legal advice, and should not be relied upon because the response is based upon the limited facts provided and it is impossible to meaningfully evaluate any legal problem without a thorough review of the pertinent facts and law which applies to the matter.

You need to look at the corporate by-laws regarding dealing with shareholders. One problem you may have is the 50/50 split. A lot of by-laws do not have sufficient provisions to deal with this type of situation. Also take a look at the dissolution and wind-down provisions to see if there is some language that would allow you to wind down and handle it that way. Another avenue, albeit a costly one, can be to request a court appoint a receiver to figure out what to do. Be careful in how you handle this, as officers owe the corporate a fiduciary duty and in certain circumstances stockholders can owe each other fiduciary duties. I have litigated these types of matters before and they can get very sticky very fast. I think it would be a good idea for you to take your corporate records to a good corporate attorney with litigation experience to review and help you determine what options you might have.

The starting point is a thorough review of the corporate Bylaws and any associated Shareholder Agreement. If you used a standard form book then you may not find anything to help you. If a competent business attorney drafted the documents you may have a force out provision. The careful review should be done by an experienced business attorney who can give you accurate advice. If there are no Bylaws or a Shareholder Agreement, or neither has any language that helps answer your question, you should seek the assistance of a mediator but get one that is experienced with business litigation matters. A non-attorney mediator will not be very helpful in this situation. If the mediation files you can resort to filing a petition with the court in Dallas County to have a receiver appointed or you can discuss with your business attorney the possibility of simply forming a new corporation and continuing on your own. You'll need to make sure you don't run afoul of any laws or agreement that prohibit you from doing so. DISCLAIMERS. Mr. Connor is licensed to practice law in the State of Texas. He may be reached by phone at 512.477.2141, by email at [email protected], or through his website at www.jonconnorlaw.com. The responses provided in this comment are not legal advice, do not create an attorney-client relationship and may vary depending on the jurisdiction of the matter. This site should not be used as a substitute for legal advice. These responses are for educational purposes only and should not be relied upon as anything other than general information. Seeking the advice of an attorney is strongly encouraged. Any information in this comment may not be used to eliminate or reduce penalties by the IRS or any other governmental agency.