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Richard - Bizlaw
Richard - Bizlaw, Attorney
Category: Business Law
Satisfied Customers: 10628
Experience:  30 years of corporate, litigation and international law
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I own 100% of the shares in an S corp. in CA. I am selling

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I own 100% of the shares in an S corp. in CA. I am selling the business by selling my shares in the corp. The business will continue under the same name. I asked IRS if I needed to close out my EIN and have the new owners apply for a new EIN. They went through all the reasons to keep/refile and finally said the answer lies in whether or not the CA Secretary of State will require them to file a new corporate charter. I have tried numerous times to contact the SOS, but cannot get through. I would prefer that a new EIN be issued. Question is A) Does a new EIN have to be issued, and B) If we desire that this be done can the new owners apply for a new EIN. We are an insurance agency and all commissions are paid against the EIN.

bizlaw :

Ordinarily, on the sale of stock of a corporation, the EIN is not changed. The purpose of doing a stock sale from the buyer's point of view is that they retain the benefit of the history of the company. There could also be some adverse tax consequences on reincorporating for the buyer. Since you are no longer in the business through the company, you have no use for the existing EIN and could not use it in any event.


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Customer:

Since income after I sell my shares will be posted against the EIN, wont the IRS look to me to pay taxes since I am listed as the owner of 100% of the shares of the corp under that continuing EIN.? What about the CA Sec of State? Will they require a new corporate charter if new individuals take ownership of the stock?

bizlaw :

The IRS will not look to you for any income generated after the sale. The reason is that as part of the sale documentation you will change the subchapter S election removing you as a shareholder. You will be responsible for income generated prior to the sale and the new owners will be responsible for all income after the sale. If you have more questions please let me know. If not please rate my answer highly as that is how I am compensated.

Customer:

Ok - what about the ques. on CA. corporation charter. Will they be required to generate a new charter when they become owners of the shares? IRS says if this is a requirement, then they will have to file for a new EIN.

bizlaw :

There is no need for them to get a new charter once they become owners. As I said that could create adverse tax consequences for them. I have never heard of the IRS requiring a new EIN number for a company where the stock has been sold. There is no such requirement.

bizlaw :

One thing you do want is to determine what the profits are as of the date of sale so that does not become an issue in the future.

bizlaw :

If I have answered all your questions please rate my answer highly. If you have more questions let me know.

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