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What are the steps to change ownership in a s corporation in…

What are the steps to...
What are the steps to change ownership in a s corporation in California? Initially it was 2 shareholders, I have to remove one of them.
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Answered in 8 minutes by:
3/20/2018
socrateaser
socrateaser, Attorney
Category: Business Law
Satisfied Customers: 40,061
Experience: Retired
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Hello,

The term, "S Corporation" refers to federal and state tax law. It has no application to issues of corporate ownership or registration with the California Secretary of State. The State recognizes all for-profit corporations as just that: corporations.

A shareholder in a corporation cannot be "removed." The shareholder must be convinced to sell his or her shares, to the other shareholder(s), or to the corporation itself. There is an exception where a board of directors cannot function due to an even number of shareholders being on opposite sides of a governing issue. But, this would require petition a court to dissolve the corporation entirely. So, unless you are determined to start a new corporation and dissolve the current corporation, your options are limited.

I realize that my answer may not be exactly what you were hoping to read. However, under the circumstances, the best that I can do is to explain what the law is and is not, so that you can avoid expending valuable resources looking for answers that do not exist, and concentrate on the options that are actually available.
I hope I've answered your question. Please let me know if you require further clarification. And, please provide a positive feedback rating for my answer (click 3, 4 or 5 stars) -- otherwise, Justanswer retains your entire payment, and I receive nothing for my efforts in your behalf. Note: If you cannot find the rating button on your webpage, please just type in your rating in a response to this note, and customer service will apply the rating for you.

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Customer reply replied 3 months ago
Sounds good, so if the shareholder sells his shares to the other shareholder. What are the steps?

1. Negotiate a price.

2. Sign an agreement to buy-sell the shares. Agreement can be very simple or very complicated, dependent upon the sort of liability and confidentiality the parties choose to release and maintain.

3. Seller signs the share certificate over to the buyer.

4. Corporate secretary enters the change in shares and shareholders into the corporation records.

Done.

I hope I've answered your question. Please let me know if you require further clarification. And, please provide a positive feedback rating for my answer (click 3, 4 or 5 stars) -- otherwise, Justanswer retains your entire payment, and I receive nothing for my efforts in your behalf. Note: If you cannot find the rating button on your webpage, please just type in your rating in a response to this note, and customer service will apply the rating for you.

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socrateaser
socrateaser, Attorney
Category: Business Law
Satisfied Customers: 40,061
Experience: Retired
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DISCLAIMER: Answers from Experts on JustAnswer are not substitutes for the advice of an attorney. JustAnswer is a public forum and questions and responses are not private or confidential or protected by the attorney-client privilege. The Expert above is not your attorney, and the response above is not legal advice. You should not read this response to propose specific action or address specific circumstances, but only to give you a sense of general principles of law that might affect the situation you describe. Application of these general principles to particular circumstances must be done by a lawyer who has spoken with you in confidence, learned all relevant information, and explored various options. Before acting on these general principles, you should hire a lawyer licensed to practice law in the jurisdiction to which your question pertains.

The responses above are from individual Experts, not JustAnswer. The site and services are provided “as is”. To view the verified credential of an Expert, click on the “Verified” symbol in the Expert’s profile. This site is not for emergency questions which should be directed immediately by telephone or in-person to qualified professionals. Please carefully read the Terms of Service (last updated February 8, 2012).

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