How Can I Dissolve an S Corporation?

I'm a 20 percent shareholder in an S corporation with four other equal partners. I see no financial future, as we are having to put money into a sinking a ship just to break even every year. I want to dissolve the corporation and split the debt. Can I be compelled to put more money in if I don't get a majority vote to dissolve?

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Your rights as a minority shareholder depend on whether you have a written shareholders agreement and, if not, the default provisions contained in your state corporate law.

Sometimes, shareholders agreements will include terms that explicitly don't require shareholders to invest additional capital.

However, if the other shareholders choose to put in more capital, your ownership can be diluted. Or, if you refuse to contribute more, the other shareholders can buy you out.

If your other partners are determined to keep the company going and you want to leave, you may want to consider making a proposal that they buy out your interest-- rather than forcing the company to dissolve -- so that at least you can leave the sinking ship, even if they choose not to.

An attorney can help you explore the options and craft the proposal.
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