"I am not doing anything until an agreement is done and signed."👍

Does she know  a shareholder of an S Corp is also supposed to be an employee if she works for the business?

EDD will assess unemployment tax, right? How much can that be? A lot cheaper the including 50% of the S Corp's income, probably. 

"I explained that she'll have big tax liabilities from investment income. She countered that they agreed that she would only have the tax losses from operations." S Corps don't work that way. If you're a 50% shareholder, you get 50% of everything.