how do I sell my business shares in s-corp?

Discussion in 'Tax' started by johnmolinda@yahoo.com, Feb 12, 2007.

  1. Guest

    I own a business that is structured as a corporation with s-corp
    status with the IRS. A private party wants to buy the business. Now
    of course he can just buy the assets of my corp and form his own corp
    but doesn't want to because off all the licenses and bank accts we
    have. It would be a paperwork nightmare.

    So basically I want to sell him my shares in the corporation. That way
    he can just walk in and take over.

    My questions are:

    1. How exactly do you sell the shares you own (I own 100%)? What
    document proves they are xfered to the buyer?
    2. The corp has s-corp status with the IRS. Profits from the corp are
    automatically tagged to my personal income. How is this changed so the
    IRS sees the new owner of the corp?
     
    , Feb 12, 2007
    #1
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  2. Phil Marti Guest

    <> wrote:

    >I own a business that is structured as a corporation with s-corp
    > status with the IRS. A private party wants to buy the business. Now
    > of course he can just buy the assets of my corp and form his own corp
    > but doesn't want to because off all the licenses and bank accts we
    > have. It would be a paperwork nightmare.
    >
    > So basically I want to sell him my shares in the corporation. That way
    > he can just walk in and take over.
    >
    > My questions are:
    >
    > 1. How exactly do you sell the shares you own (I own 100%)? What
    > document proves they are xfered to the buyer?


    This is a question for the lawyer who draws up the sale agreement.

    > 2. The corp has s-corp status with the IRS. Profits from the corp are
    > automatically tagged to my personal income. How is this changed so the
    > IRS sees the new owner of the corp?


    You stop reporting the passthrough income, and he starts reporting it.

    I suggest you engage the services of an accountant in addition to the
    lawyer. There may be ways that the sale can be structured to lessen its
    effect on your income tax. You also will need advice on dealing with the
    issue of YTD corporate income at the time of the sale.

    --
    Phil Marti
    Clarksburg, MD
     
    Phil Marti, Feb 13, 2007
    #2
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  3. <> wrote in message
    news:...
    >I own a business that is structured as a corporation with s-corp
    > status with the IRS. A private party wants to buy the business. Now
    > of course he can just buy the assets of my corp and form his own corp
    > but doesn't want to because off all the licenses and bank accts we
    > have. It would be a paperwork nightmare.
    >
    > So basically I want to sell him my shares in the corporation. That way
    > he can just walk in and take over.
    >
    > My questions are:
    >
    > 1. How exactly do you sell the shares you own (I own 100%)? What
    > document proves they are xfered to the buyer?
    > 2. The corp has s-corp status with the IRS. Profits from the corp are
    > automatically tagged to my personal income. How is this changed so the
    > IRS sees the new owner of the corp?
    >





    The first thing you need to do is contact your attorney & your CPA.

    The sale of the shares in your S corp will require the corp sec to issue a
    new stock certificate to the new owner & cancel the old one.

    When preparing the S corp tax return, the transfer of interest will consist
    of the income being allocated on the k1.




    ___________________________________
    <<< Benjamin Yazersky, CPA [NJ & NY] >>>
    -----> real address on hobokeni or hobokenx <-----





    "This written advice was not intended or written to be used, and it cannot
    be used by any taxpayer, for the purpose of avoiding penalties that may be
    imposed on the taxpayer."

    (The foregoing legend has been affixed pursuant to U.S. Treasury Regulations
    governing tax practice.)





    The information transmitted is intended only for the person or entity to
    which it is addressed and may contain confidential and/or privileged
    material. Any review, retransmission, dissemination or other use of, or
    taking of any action in reliance upon, this information by persons or
    entities other than the intended recipient is prohibited. If you received
    this in error, please contact the sender and delete the material from any
    computer.
     
    Benjamin Yazersky CPA, Feb 13, 2007
    #3
  4. <> wrote
    >I own a business that is structured as a corporation with s-corp
    > status with the IRS. A private party wants to buy the business. Now
    > of course he can just buy the assets of my corp and form his own corp
    > but doesn't want to because off all the licenses and bank accts we
    > have. It would be a paperwork nightmare.
    >
    > So basically I want to sell him my shares in the corporation. That way
    > he can just walk in and take over.
    >
    > My questions are:
    >
    > 1. How exactly do you sell the shares you own (I own 100%)? What
    > document proves they are xfered to the buyer?




    You get a lawyer to create all the necessary documents to finalize the sale.




    > 2. The corp has s-corp status with the IRS. Profits from the corp are
    > automatically tagged to my personal income. How is this changed so the
    > IRS sees the new owner of the corp?




    It's not automatic, and if you think it was, then you're missing something.
    The corporation files an 1120S with the appropriate K-1 forms to report the
    net profit and/or loss to the shareholders during the year. If you sell
    your shares in mid-year you and the other shareholder will EACH receive a
    K-1 reporting your respective shares of net profits (or losses) for the
    year. There are two different ways to do this, so consult a CPA or EA
    familiar with "S" taxes, ~~~before~~~ you go to the attorney to draw up the
    sales agreement, as it should be stipulated in the documents how this get
    handled.

    FYI: You'll be getting a K-1 that will be prepared by the new shareholder,
    so you had better know he's not going to stick you with the profits that
    you'll not have any benefit from.



    --
    Paul Thomas, CPA
     
    Paul Thomas, CPA, Feb 13, 2007
    #4
  5. Ryan Guest

    On Feb 12, 7:35 am, "" <>
    wrote:
    > I own a business that is structured as a corporation with s-corp
    > status with the IRS. A private party wants to buy the business. Now
    > of course he can just buy the assets of my corp and form his own corp
    > but doesn't want to because off all the licenses and bank accts we
    > have. It would be a paperwork nightmare.
    >
    > So basically I want to sell him my shares in the corporation. That way
    > he can just walk in and take over.
    >
    > My questions are:
    >
    > 1. How exactly do you sell the shares you own (I own 100%)? What
    > document proves they are xfered to the buyer?
    > 2. The corp has s-corp status with the IRS. Profits from the corp are
    > automatically tagged to my personal income. How is this changed so the
    > IRS sees the new owner of the corp?


    Yes - the legal documents and agreements should be prepared by a
    lawyer. Some, but probably not all, of the documents would be a Stock
    Purchase Agreement, Assignments, Stock Powers and the necessary
    corporate resolutions.

    There are different strategies for selling the stock of an S
    corporation, depending on if you want to close the books or not. I
    would advise you obtain the services of a tax and corporate attorney
    who could probably advise you on the entire deal and prepare all of
    the necessary documents. This way you kill two birds with one stone
    and get expert planning advice. You will want to negotiate specific
    tax provisions in the stock purchase agreement to protect you.

    - This is not to be regarded as tax advice and cannot be used for the
    purpose of avoiding penalties.

    Ryan Pinder - Tax Attorney
    rpinder@ gmail.com
     
    Ryan, Feb 15, 2007
    #5
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