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how do I sell my business shares in s-corp? johnmolinda@yahoo.com 02-12-2007
Posted by johnmolinda@yahoo.com on February 12, 2007, 7:35 am
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 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?


Posted by Phil Marti on February 13, 2007, 11:19 am
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>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


Posted by Benjamin Yazersky CPA on February 13, 2007, 11:19 am
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>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.)





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Posted by Paul Thomas, CPA on February 13, 2007, 11:19 am
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>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
paulthomascpapc@bellsouth.net











Posted by Ryan on February 15, 2007, 4:24 pm
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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


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