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Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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How do I change the percentages of S Corp shareholders For

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How do I change the percentages of S Corp shareholders? For example, at incorporation there were 4 shareholders. Only 1 has contributed cash. The other 3 are not going to contribute going forward and have agreed to change their ownership to zero. What do I need to file?



First, if three of the original shareholders who are no longer part of the corporaton never contributed any capital, there is nothing to change on the corporate books as far as redistribution of capital assets or basis. And as far as the IRS is concerned, you do not need to report or file forms when new shareholders are acquired or if shareholders leave a company.


At this point you have done everything that is required, by issuing final K-1 forms to the shareholders who have left the company. It would be appropriate for internal purposes to issue an addendum to the original articles of incorporation, simply stating that effective on ___date___ 3 shareholders have relinquished their shares and rights to corporation shareholder status, and that the remaining shareholder now currently owns 100% of the shares.


There are no forms required to be filed for the IRS and no changes need to be made on the books if no capital was ever invested by these shareholders.


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