If my business partner has IRS trouble, can the IRS lien or encumber our business accounts?

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If my business partner has IRS trouble, can the IRS lien or encumber our business accounts?

I am 50% owner of a mid sized financial firm with 40 employees. I have recently discovered my business partner, who owns the other 50%, has deep troubles with the IRS. We are an S-Corp. I have nothing to do with his personal tax problems and any liens on our cash accounts will effectively put the business under.

Asked on December 27, 2014 under Business Law, New York

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 6 years ago | Contributor

In theory, no--the IRS cannot encumber, levy upon, put a lien on, etc. the accounts of a corporation due to the personal tax trouble of one of the shareholders, even of a closely held corporation.

In practice, IF the IRS believes that the company is more-or-less a "shell" or artiface to hide assets and defraud creditors, or otherwise that your partner has co-mingled personal and corporate assets, so that at least some of the "corporate" assets are his personal assets, they may try to reach the corporate assets on the grounds they are actually his personal assets.


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