It is simply an accounting of profits that are S-corp profits and not C-corp profits that would have to pay double tax if distributed.Payments of property distributions (C-corp or S-corp at FMV), cash dividends (C-corp profits), or tax-free cash distributions (S-corp profits) from a corporation have to be paid equally to each and every shareholder on a per share basis. But, payments do not have to ever be made unless the Board of Directors decide to make such payments or the corporation is liquidating. in some states a minority shareholder has the right to sue for liquidation of the corporation and distribution of all assets to the shareholders.I am trying to figure out how to get out of this company without having to take a large loss. thanks Lonnie First, You should not rely upon someone on the internet to give you legal advice as we do not know all the facts and the laws of your state and we are not lawyers.He has only offered to by my stock back at 20% of its value, and I want full value. You should understand that the AAA account is only a bookkeeping account to keep track of profit that has been allocated to shareholders that have paid/or will pay tax on the profit so that it can be taken out tax-free at a future time.It is not a separate fund of cash and profits are not paid into it.
What it means is that the president of the company is not following the bylaws and might be held responsible for his actions of violating the corporate bylaws in a lawsuit to relieve him of his position as a president and officer of the company.
If the company I am involved in has never had a meeting stating where the distributions are going to go to, Can the president (who owns 85% of the company) just decide to pay down the AAA debt with the profits that the company has?
Would it be possible to have my lawyer say that because there was no meeting he has to distribute my portion of the profits to me? I am trying to help my lawyer and find out what I can do also.
Justification for this type suit is may be such things as the shareholder controlling the corporation is not following the bylaws of the corporation, mismanagement, and/or operating in an unlawful manner. Sometimes just the threat of this will bring cooperation from the majority owner.
If there has been questionable accounting and tax preparation, your attorney might point out that you are considering notifying the IRS for a tax audit.
However shouldn't money be paid to this account within the business so that I don't have to pay income taxes on my profits that were used to pay on this loan. It is just a bookkeeping account that keeps track of how much profit or loss the business has had in prior years.