In a perfect world, groups of potential business partners would sit down before they started their new ventures to hash out the details of their relationship. They would work in close consultation with one or more attorneys to produce detailed subscription, operating and loan agreements documenting their arrangements and clearly delineating responsibilities. In the real world, the birth of closely-held businesses is sometimes far messier.
There are a variety of ways to prove or disprove that a person is an equity holder in the absence of membership certificates, stock ledgers or written operating agreements. A perennial favorite, however, is using an entity’s tax returns, specifically, the Schedule K-1.