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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12484
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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I have a s corp and would like to bring my daughter in as a

Customer Question

i have a s corp and would like to bring my daughter in as a 25% owner how do i go about this
Submitted: 2 years ago.
Category: Tax
Expert:  Lane replied 2 years ago.
Hi,You can simply gift her 25% of the stock, Keep in mind that this year parents can give each of their children up to $14,000 ($28,000 for a married couple) without incurring a gift tax.
Expert:  Lane replied 2 years ago.
This can turn out to be a great estate planning move as well ... gifting 14000/28000 per year to stay under the gift tax radar (ALTHOUGH, giving more than that simply requires filing a form 709 (to track against the lifetime gift tax exclusion ($5,430,000 in 2015) No actual tax
Customer: replied 2 years ago.
is this done by a tax professional or a corporate lawyer?
Expert:  Lane replied 2 years ago.
This is a corporate law issue ... Are you an S-Corp as the basic entity? Or are you say, an LLC or regular corporation that elected S-Corp taxation somewhere along the way?If you declared a numberof shares issued then all you really need is a stock transfer agreement saying that you are gifting 25% ownership (25 % of outstanding shares) But yes, best practice is to get an attorney to draw it up
Expert:  Lane replied 2 years ago.
But since an S-Corporation ownership is controlled by shareholder ownership, a transfer is as simple as transferring your physical shares to your son, and the corporation secretary noting the change in ownership in the corporate records.
Expert:  Lane replied 2 years ago.
I just provided some more time here ... other questions?
Expert:  Lane replied 2 years ago.
OK I still don't see you coming back into the chat so I'll answer generally, ...If you are a corporation you simply record the change of ownership and do it as a gift (you would have to have issued a number of shares when you registered with the Secretary of state as a corporation )Some register initially as an LLC and then elect S-Corp TAXATION, but in that case the underlying entity is still the LLC ... so you would amend the operating agreement to gift 25% of the LLC INTEREST (ownership in LLC terminology) to your daughter ... the for tax purposes, she own's 25% of the sharesBut, yourt intuition is good This is a business form/corporate law (state Law ) issue ... the S-Corp IN MOST states is just a manner of taxation
Expert:  Lane replied 2 years ago.
still don’t see you coming into the chat here … I’ll move us to “Question and Answer” mode … (We can still continue our discussion there, just not in real-time chat) … This way JustAnswer won't charge you for additional chat time and we can continue the dialogue.
Expert:  Lane replied 2 years ago.
Hi,
I’ve moved us to the Q&A mode so JustAnswer won't charge you for more Chat time.
Please let me know if you have ANY other questions at all...
Lane
Expert:  Lane replied 2 years ago.
Hi,
Just checking back in, as I never saw you come back after that last answer.
Again, If you set up as a corp originally and then elected S-Corp taxation;
The transfer is as simple as transferring 25% of your physical shares to your daughter, and the corporation secretary noting the change in ownership in the corporate records.
If you initially registered as an LLC, and then elected s-corp taxation;
Just amend (of if you never drafted, draft) your operating agreement and give her 25% ownership
Let me know if you have questions ...
Lane