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Richard
Richard, Attorney
Category: Business Law
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Experience:  32 years of experience practicing law and a businessman.
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What happens to a 100% owner of an S-Corporation if he dies?

Resolved Question:

What happens to a 100% owner of an S-Corporation if he dies? Does the companies fall to the spouse or does a will or trust need to specify.
Submitted: 2 years ago.
Category: Business Law
Expert:  Richard replied 2 years ago.

Good morning. It passes pursuant to his will as any non-specified asset. If the shares are subject to a buy/sell agreement, the estate/beneficiary may be required to sell them back to the company or other shareholder.

 

 

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Please be aware that the information provided here is not legal advice. Rather it is simply general information. All states have intricacies in their laws and any information given is simply information only and specifically is not intended to be, nor does it constitute, legal advice. This communication does not establish an attorney-client relationship with you. I hope this answer has been helpful to you.

Customer: replied 2 years ago.

how do we find out if the shares are subject buy/sell agreement? Also, does the corporation become desolved after their death or changed over to the spouses name.

Expert:  Richard replied 2 years ago.
The corporation is not impacted by the death. The shares just get transferred to someone else. You would ask the other owners about the existence of a buy sell if you don't find them in the decedent's records.
Customer: replied 2 years ago.
But, at this time, it's a sole owner (100% stockholder) and make matters more complicated, the industry where this corporation is created (pharmacueticals) only allows pharmacists to have an officer position within the corporation. The spouse is not. So, if the shares can't be transferred to the spouse (or can they as just shareholders and not officers?), what happens to the corporation, must it be liquidated to pass on to the spouse?
Expert:  Richard replied 2 years ago.
If he's the 100% owner, there will be no buy sell. Based upon those facts, the spouse will need to sell the shares or the company assets to someone else. Otherwise, it will have to be liquidated, but it's typically pretty easy to sell a pharmaceutical company as a going concern.
Customer: replied 2 years ago.
So, the spouse can't have shares in this type of corporation, correct?
Expert:  Richard replied 2 years ago.
That is correct.
Customer: replied 2 years ago.

One more question, sorry. Is it better to have a trust or a will for the sole owner of the corp?

Expert:  Richard replied 2 years ago.

Probably simpler to use a will to transfer ownership at death rather than a living trust to transfer ownership now. Even though a living trust is revocable, it would have to meet certain requirements to qualify as a S corp eligible shareholder and you would have to deal the the pharmacy license requirement issue.

Richard, Attorney
Category: Business Law
Satisfied Customers: 46167
Experience: 32 years of experience practicing law and a businessman.
Richard and 9 other Business Law Specialists are ready to help you
Customer: replied 2 years ago.
Thank you very much!!

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