Question

Sharon owns 79 percent of ABC, Inc. (an S corporation) and would like to terminate its S corporation status. Jason, who is a 5-percent owner, does not want to terminate the S corporation status. Sharon cannot terminate the election without Jason’s permission.

A) True
B) False

Answer 1

B) False

Step-by-step explanation:

This statement is completely false in 32 states and mostly false in the remaining 18 plus DC.

Corporations and limited liability companies are regulated by state's statutes, so there is no one single national law that applies to them. But 32 of them have adopted Model Business Corporation Act to regulate all types of corporations. The rest of the states have similar laws though, although some details may vary.

All that you need to dissolve any type of corporation is a majority vote, this means 50% + 1 stock. In this case, Sharon owns 79% of ABC, which is much more than 50% + 1, so she can dissolve ABC all by herself. And that applies to every state, the difference is about the procedures after the corporation is dissolved, not the dissolution itself.

Answer 2

B) False

Step-by-step explanation:

As the decisions in the AGM is made on voting of the stockholders. Sharon has controlling interest in ABC Inc. because he has the more than 50% of the share holding in ABC Inc. Sharon can Terminate the election because he has the majority of voting rights and on the other hand the Jason has 5% interest and voting rights of the company which is even not enough to create a significant influence over ABC Inc. The decision of Sharon will be considered as final.