partner buyout

[OzNY]

2 partners in an S Corp...one wants to leave...i am not sure if he was asked to leave or was it voluntary.

This is a haunted house that only operates for 6 weeks/year

Originally, it was one person, the 2nd who is leaving did not put in any money to get shares (they did not start out as an S Corp).  The person leaving put up all the money to operate the business and got paid back when they season was over.  This was the first year for payroll.  The previous years, they just split the profit or loss equally on the k1 to put on their personal return.

Is the person leaving entitled to some money?  I know this is very vague, but any suggestion is appreciated.

[IRonMaN]

"Is the person leaving entitled to some money?"

That is up to the two shareholders to agree on.  You don't really say how involved the departing shareholder was in building the business to make it more valuable than it was before he started.  Besides, strangers on the internet don't really have a good feel for the dynamics of that business.

[OzNY]

the partner who is leaving is really the one who did the manual labor and put up the money to buy materials and pay for everything......the reason that I am asking is because they don't agree on a monetary exit...I personally think it is unfair not to give any money to the partner who is leaving...before him, the company who in the red and had little to no gross sales...the partner who is leaving brought the company to life...the haunted house entertainment has become very popular here

[IRonMaN]

This is a perfect example of why folks should have buyout agreements.  Handshakes work well to start, but they don't help when things go south.  Sounds like they have some arm wrestling to do or else someone is going to be calling an attorney.

[PATAX]

Iron Man is exactly right. This happens sometimes with family Partnerships also. Sometimes their excuses for not getting a written agreement are: "Everyone is getting along, We don't want to rock the boat, etc"

[qbteachmt]

They should consult whoever it was that advised them to make an S Corp. Apparently that person thought this all made sense. Might as well keep getting guidance from the person that has already steered them into a weird arrangement.

[abctax55]

"....I personally think it is unfair  ... "

Professional 'personal feelings' aren't relevant.  The agreement (or non-agreement) of the parties is relevant.  And if they can't agree - both need to retain legal counsel. 

And if you are trying to advise both of them - hope you've chatted with your E&O insurance carrier regarding the conflict of interest.