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Stock Transfer Rules and Procedure

Stock transfers take place for many reasons and the documents required to initiate the process differ depending on the kind of transfer. In a company, for example, stock is often transferred between the buyer and seller based on a private agreement. Even though specific requirements to transfer shares could be different, a few general documents like a stock transfer form, letter of instruction, and original stock certificates are usually required by most guarantors.

Listed below are a few questions answered by business lawyers on stock transfer related issues.

What are the steps that I need to follow to remove a partner from an Illinois S corp? He doesn’t want any equity payments and has no debt owed to him.

If the partner is letting go of his interest voluntarily, all he should need to do is sign a Bill of Sale or Assignment of Interest. This would transfer his S Corp ownership shares to your name. In the event that your company has issued stock certificates, he would also need to sign the stock transfer provisions on the stock certificate and hand it over to you. The next S Corp tax return will then reflect the new ownership so you will probably want to file an amendment to your Articles of Incorporation at that time if your partner was a registered agent of the S Corp.

My sister took stocks from my deceased mother. How can I get information regarding this transfer of stock?

If the stock was publically traded and you have the names of the stock, you would be able to look up closing prices in a paper like The New York Times, The Wall Street Journal, or a similar journal either on the day before or on the day of your mother's death.

Unless the stock in question was owned jointly by your mother and sister, the stock could not have been transferred to your sister without letters testamentary being issued by the probate court to the executor of your mother's will. The will would then have to be filed and would be a public record.

If a person wants to do a stock transfer what documents would they need? Also, if the company is in debt, would the new part owner acquire some of this debt?

The process would have to be done through a stock transfer agreement. This is available at The part owner would not acquire the debt unless he/she signed a kind of personal guarantee for the loan.

In a stock transfer, how does one find the value of the company and its shares? And how much influence would a new part owner, who owns 20% of the company, have on its business decisions?

The value of the company is calculated by computing the fair market value of the company’s assets minus the fair market value of its debts. A new part owner who owns 20% would be seen as a minority shareholder. He would have limited power in the decision making process unless he joined others who owned 31% more.

How can I transfer the name of each stock certificate of my personal corporation to my family trust?

All you should need to do is to sign the back of the certificates and write the trust name as assignee. Then you would have to list the certificates on the trust statement of assets.

Stock transfers in the form of gifts can help friends, family members, or a charity. Transferring stock, rather than giving cash, may also translate into tax advantages for both parties. As a donor, transferring stock as a gift means you are giving the recipient the chance to have an asset that may continue to appreciate over time. However, whether you are gifting stock to an organization or a person, you may wish to clarify doubts about proper procedures with a legal expert to avoid problems with the Internal Revenue Service (IRS).
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