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Shareholder Rights

Owners of the less than 50% of the shares of a corporation, partnership, or a limited liability company have certain rights, even if they do not control the corporation. Anyone who owns less than 50% of a corporation, partnership, or limited liability company would be considered a “minority” owner.

Being a minority owner can sometimes be difficult or frustrating. The majority, for example, controls how much of the business’ profits will be paid out to the owners as distributions or dividends. The majority can decide to reinvest the profits or to pay them out as bonuses to employees and managers. In some cases, the decision to withhold profits requires the owners (such as members of LLCs, partnerships, and S corporations) to pay taxes on money that they never received.

In sum, a controlling majority can use its control for its own benefit rather than the benefit of the company as a whole. Alternatively, the controlling majority may hire the wrong managers, or make careless or uninformed management decisions.

A minority owner or stockholder, however, is not without remedies. The shareholder, partnership, or limited liability agreement may contain a provision for a buyout of an unhappy owner. Moreover, under Florida law, if the company is deadlocked, a judge may order a dissolution and sale. There is also the possibility of requiring corrective action by management. In many cases, if the management refuses after demand to take corrective action, the law permits a lawsuit, called a “derivative action,” to be filed by shareholders in the name of the company to address management’s wrongdoing.

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