QUESTION.
I have an S Corp which I own 60%, my spouse owns 20%, my sister(recently deceased) owns 10%, and another sister own 10%. I would like to purchase all the stock shares from all above, but not sure how to do this. The corportion has had no activity for the the past five years or so. I am thinking of incorpating my Scedule C business into the S corp and would like to have 100% ownership in the stock. I am not certian how to go about doing this.
ANSWER.
If the corporation you talk about has been inactive for five years, then I assume it is not worth anything. Assuming I am correct, then all you need to do is have the owners of the stock sign their stock ownership over to you. Stock can be sold like a car. In a way, stock represents title to a company like a car title represents title to a car.
Typically you will want to document the sale of the stock certificates in the corporation’s records. At some place you should have a stock certificate register listing the people that the stock certificates were issued to. Make sure your wife, sister, and sister’s executor sign off on the stocks you are purchasing so you have evidence of actually “purchasing” them.
If the business has value, then you will need to put a value on it. As long as everyone is family I don’t see any reason to get too involved with putting a value on the corporation and its assets. You may consider taking a look at the following book if you have to do that though. See “Buying and Selling a Business” by Robert Klueger (ISBN: 0471657026). I’ve written a book review for it at Amazon.
I hope my comments are helpful to you. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
