Partnership Agreement Used in a C-Corp

[anthony_asdf]

My question involves business law in the state of: NY

I entered into a business venture with a partner, the business entity created is a C-Corp. I signed a partnership agreement with my partner, it stipulates our capital contributions, what occurs in the case of a partner exit and other relevant items. What I signed was not a shareholder's agreement. I am in agreement with all of the terms in the agreement, and I understand it is a binding contract however I would be interested in anyone's feedback regarding the possible ramifications of having a partnership agreement, not a shareholder's agreement. Thanks for your feedback.

[Conrad Hunter]

You guys don't seem to know if you created a partnership, an LLC or a corporation from reading the message.

First, either you form an LLC or a Corporation. If a corporation, then you can take an IRS election and declare it a "S" corporation so it is taxed like an LLC. There are restrictions on S corporations which eliminate a number of the best features of a corp like issuing multiple classes of stock, etc.

A corporation has stockholders. The corporation issues stock shares in proportion to investments. The stockholders elect a board of directors and they hire or elect the officers. A corporation has bylaws. A partnership agreement is meaningless and there is NO SUCH THING as a partner in a corporation.

God, I hope you didn't split the stock 50/50. Go get locked in padded rooms.

Whoever owns a majority of the voting common stock controls the corporation.

[flyingron]

You don't form a S Corp or C Corp, you just form a corporation. You then can elect S Corporation STATUS for tax purpose (otherwise you have a C Corporation). The term exists only as a reference to the Internal Revenue Code subchapter letters.

An LLC is a distinct entity from a corporation (sort of a light corporation). Your LLC, for taxation purposes files as either a (S or C) corporation, partnership, or sole proprietorship (in the case of a single member). I don't see any discussion in the original post that would indicate you got anywhere near an LLC.

Your "partnership agreement" doesn't seem that it would have any bearing on the corporation. It governs an entity you appear to have disbanded (or even if you didn't wouldn't apply to the corporation). You need to issue the appropriate amount of shares. The shareholders vote on the board. The board, in accordance with the corporation documents (articles of incorporation and adopted by laws) can issue stock and make other decisions on the corporation. Shareholders agreements limit the share holder's behavior. These are handy to make sure that the shareholders of an S Corporation don't do anything that would jeopardize that election, etc...

You need to stop screwing around if there is real money involved. Have the records looked at by an attorney.

[Bubba Jimmy]

Your corporation needs bylaws that govern how the company is run, how shareholders are treated if they want out, etc. As flyingron points out, there's a lot more to setting up and administering a corporation than just filing articles with a state. You need to document actions of the board, minutes of shareholder meetings, results of shareholder elections of officers, etc. You definitely need outside help, or you're going to cost yourself a lot in the long run. And yes, it is extremely likely that you want to elect S corporation status with the IRS for tax purposes.