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Michael
Michael, Attorney
Category: Business Law
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Experience:  Experienced Business Lawyer
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I am selling my corporation to a friend for $1 just to get

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I am selling my corporation to a friend for $1 just to get it off my hands. Through LegalZoom, I have transferred all my stock and updated my bylaws. BUT now i need to transfer all my stock to him so that he now assumes all liabilities moving forward. I did do a Bill of Sale agreement which I just got off the internet. I can't find any information on how to report the transfer of all ownership to the IRS so they harass him and not me ;)
Submitted: 4 years ago.
Category: Business Law
Expert:  Michael replied 4 years ago.

Michael :

Hi there, my name is XXXXX XXXXX I'm a business law attorney with experience in all aspects of business law. I'll do my best to assist you.

Customer:

Here is my dilemma: I am selling my corporation to a friend for $1 just to get it off my hands. Through LegalZoom, I have transferred all my stock and updated my bylaws. BUT now i need to transfer all my stock to him so that he now assumes all liabilities moving forward. I did do a Bill of Sale agreement which I just got off the internet. I can't find any information on how to report the transfer of all ownership to the IRS so they harass him and not me ;)

Michael :

I understand - I assume you have an S-Corp?

Customer:

Yes

Customer:

He lives in California by the way

Michael :

There's no need to officially report a transfer of a business to the IRS, but you would have to do so with the state authority.

Michael :

The IRS bases its business information on the underlying state registration, so it would change as well when notified of the update.

Customer:

so if Legal Zoom has done all that for me, am i officially free of the business once I get those papers in hand? Will he have to reinstate the biz in Ca?

Michael :

If you succcessfully filed a form 100B with the CA BOE and a certificate of amendment with the Department of State, the state has been notified and the registered business owner has been changed.

Michael :

Unless the corporation had been suspended, you wouldn't need to get it reinstated. The registration would just have to be amended.

Customer:

I don't think I did - they only filed with Ga and did not advise me that I needed to do anything else. Should I fill out the 100B form with CA?

Michael :

Ah, I actually thought you lived in CA as well.

Michael :

No, the process is diffferent.

Michael :

The CA party would have to register a completely new business entity in CA.

Michael :

You would transfer the assets of the GA corporation to the CA entity and dissolve the GA corporation.

Michael :

It is really starting a new corp and closing the old one - there's not really a "transfer" of a corporation from one state to another.

Customer:

Ok so Legal Zoom basically told me the wrong information, they just changed the business owner name on the current documents...

Michael :

It sounds that way. If you incorporated in another state you'd also need a new EIN with the IRS - again, almost like setting up another business.

Customer:

ok I'll have to call them now as they already completed this work...thanks!

Michael :

You can find more information about that here.

Michael :

I hope this answer has been helpful. I'd be happy to further clarify my response and follow up with any other questions. If you're satisfied with my answer, remember to hit the "accept" button. Bonuses and positive feedback are always appreciated! -Michael

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