Selling an already sold company
My father sold his company to a private equity firm. Before he sold it he gave 5% ownership each of his children. It’s been over 5 years and the private equity firm is still making payments for the sales, but my father pockets the money generated from our 5% equity each and we have to pay taxes on the income without seeing any actual income. How do I get out of this? Can I somehow sell my 5% share after it’s been sold?
So let me get this right? YOU own the equity, the company pays dividends, but your dad takes the dividends for himself and leaves you with the tax bill?
Sounds like you need to either ask your dad for the money he has received in YOUR name or sue him for it.
That money is YOURS and should be going to you. If he is wants to continue to receive it, you need to be willing to give or sell your ownership to him.
I never remember “accepting” the equity. He has given me money for the tax bill; however, I’ve paid taxes on it for most of the years without receiving money from him for it. The problem isn’t even receiving the money (dividends or tax bill money) - it’s the fact that he has control over my financial freedom - one year, once a ballon payment from the PE firm happens...I’ll be stuck with a gigantic tax bill I can’t afford.
Yeah bottom line is, if you have share certificates which show you have actual ownership of 5% of the company's equity you are absolutely entitled to the money which your father may be pocketing. Sounds like you have a deeper issue with your dad which extends beyond the earnings you're legally entitled to so I can't speak to that but on a pure legal basis, if you truly own the 5% of the company you should inquire and fight to make sure you receive the appropriate income.
Also you're paying taxes on it without receiving any income?? How does that work?
Of course he has control over your financial freedom within the context of this 5% stake, it’s his company, he chose throw you some scraps. If you want control over your own financial freedom, why not create a company of your own and sell it to private equity?
Thanks for all your help.
Thank you for your reply.
I think you should see if under some clause he is a steward / custodian of your relevant share of income (this often happens when someone doesn't trust their beneficiary not to squander whatever relevant)
Thank you for your reply
When you file a tax return, how are you obligated to pay that tax without recording income for which that tax should be based upon?
Thank you for your reply
This just seems like some weird form of fraud.
Brings a tear to my eye. Not a sad one, but a gleeful one of how dastardly people get when money is involved.
Call up your old man, tell him you've gotten a legal opinion and what he did is fraud.
Tell him he can either purchase your share for current value, unpaid dividends, and back taxes or the next time he hears from you, it'll be with a lawyer.
Full disclosure, he doesn't legally owe you the above, but you can take advantage of the situation to milk him for all he's worth.
He ain't your daddy anymore, son.
Thank you for your reply
OP, also you may not be able to sell your shares even if you do legally own them. Usually the stockholders agreement has restrictions on secondary sales. There may be carveouts for transferring shares to a spouse or children for estate planning purposes, but typically you can't sell to a non-related third-party (at least not without the PE firm's approval).
Thank you for your objective reply.
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