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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 16544
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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I opened an S corporation in NY and issued 200 shares to myself.

Customer Question

I opened an S corporation in NY and issued 200 shares to myself. I now would like to add an officer and issue them 100 of those shares and make him an equal partner. I am sure this is something I can do by myself and would like some instruction on how to perform this transfer.
Submitted: 3 years ago.
Category: Finance
Expert:  Megan C replied 3 years ago.

MyVirtualCPA :

Thank you for your question and thanks for using JustAnswer.com

MyVirtualCPA :

How are you today?

MyVirtualCPA :

First and foremost, when you go to do the transfer, you will need to consult a CPA who will ensure that a fair value approach to ensure the sale of the shares (if you are selling the shares) is adequately documented and proper in the event of an IRS audit

MyVirtualCPA :

Then, you will need to draft a purchase agreement...even if you are only giving nominal consideration such as $1

MyVirtualCPA :

You can find a purchase agreement template online

MyVirtualCPA :

http://www.leaplaw.com/pubsearch/preview/stock_purchase.pdf

MyVirtualCPA :

However, I think you would be well advised to seek the advice of an attorney in your state, to ensure that your agreement is executed properly

MyVirtualCPA :

If you are simply giving the shares to the other officer, you would get a transfer agreement

MyVirtualCPA :

But, you also need to look at your original paperwork to see if there are restrictions on when you can transfer stock

MyVirtualCPA :

Once you draft the transfer agreement, then you physically give the shares to the other officer, and record the transfer in the ledger to your business.

MyVirtualCPA :

A transfer agreement is here: http://www.leaplaw.com/pubsearch/preview/1366_StockTransferAgmt.pdf

MyVirtualCPA :

So in short you will either draft a purchase or transfer agreement. If selling the shares, use the services of a CPA to ensure that the value of the stock is set and documented appropriately. Review your original S Corp documents to ensure that you can make the transfer - there can be restrictions on when you can transfer shares. You wouldn't know this unless you read your incorporation documents.

MyVirtualCPA :

Then, once you have your purchase or transfer agreement, physically give the shares to the new owner and record the transfer in the ledger of your business

MyVirtualCPA :

Do you have any further questions?

MyVirtualCPA :

If not, please rate my response as "excellent" so that I may receive credit for assisting you today

Expert:  Megan C replied 3 years ago.
Michael,

I see you may have had problems with live chat. If you would, please take a moment to review my response...ask any follow up questions below. If you have no further questions, please rate my response as "excellent' so that I may receive credit for assisting you today.
Customer: replied 3 years ago.

When I opened the corp it was for 200 shares with no par value. I looked at the purchase agreement and it is like twenty something pages. I think that is very detailed for what I am trying to do. Basically I am going partners with a friend and I want him to be a partner in the corp which is brand new and has no assets. Cant I just transfer the stock to him for $1 without a purchase agreement and just a transfer agreement? Also, is it necessary to have a value for the shares being there was no value when the corp was opened?


Expert:  Megan C replied 3 years ago.
Thank you for your follow up. As this is not a purchase - (I also linked to a transfer agreement which was 2-3 pages) you can use a transfer agreement. You don't have to value the shares, although it would be useful to do so in a stock sale.

From what you say, this is not a purchase agreement, rather a transfer

Please let me know if you need anything additional. If you have no further questions, please rate my response as "excellent' so that I may receive credit for assisting you today.
Customer: replied 3 years ago.

So I am allowed to just transfer stock to another person without any financial consideration. I ask that because looking around a lot of people bring up this transfer for $1.00

Expert:  Megan C replied 3 years ago.
You should do the transfer for $1, because then there is a valid contract - consideration is given. Without $1 there is no consideration.

Please let me know if you need anything additional. If not, please rate my response as "excellent" so that I may receive credit for assisting you today. Thanks again for using JustAnswer.com
Customer: replied 3 years ago.

So would I make the shares worth $.01 each?

Expert:  Megan C replied 3 years ago.
You don't need to state a value of the shares. This is not a purchase transaction.

Please let me know if you need anything else. If not, please rate my response as "excellent" so that I may receive credit for assisting today.
Expert:  Megan C replied 3 years ago.
Hello,

I just wanted to follow up with you, to see if you had any further questions about this topic. I want to ensure that you are a satisfied customer today.

I missed that you will also need to have the new officer consent to the S corp election in writing, as a requirement for S corp status is that all members must consent to the election in writing.

Here is a good step by step instructional article on how this goes. CLICK HERE

Let me know if you have further questions. I appreciate all your follow ups, and we appreciate your business. Thanks again for using JustAnswer.com
Expert:  Megan C replied 3 years ago.
Thanks for allowing me the opportunity to help you. Please let me know if I can be of any further assistance to you in this matter. I really enjoyed working with you – please feel free to request me again when you come back to ask another question. Simply enter "MyVirtualCPA" in the subject of your question Thanks again for being a JustAnswer customer

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