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  1. #1
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    Apr 2018
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    Default How to Transfer of Ownership of an S-Corporation or C-Corporation

    My question involves business law in the state of: New Jersey

    me and my wife own a construction company (50/50 shareholders, S-Corp) which we are the only owners, and we are selling the corporation to someone, what is the proper way to transfer ownership to that person?

  2. #2
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    Default Re: Transfer of Ownership of S-Corporation or C-Corporation

    Quote Quoting PHD_4_U_N_Me
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    My question involves business law in the state of: New Jersey

    me and my wife own a construction company (50/50 shareholders, S-Corp) which we are the only owners, and we are selling the corporation to someone, what is the proper way to transfer ownership to that person?
    You have an attorney draw up paperwork transferring your shares to the buyer. Its the shares that you are selling. You happen to be selling all of them to one person, but that is what you are selling.

  3. #3
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    Oct 2014
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    Default Re: Transfer of Ownership of S-Corporation or C-Corporation

    Quote Quoting PHD_4_U_N_Me
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    My question involves business law in the state of: New Jersey

    me and my wife own a construction company (50/50 shareholders, S-Corp) which we are the only owners, and we are selling the corporation to someone, what is the proper way to transfer ownership to that person?
    llworking is assuming that you are selling the stock, but is that what the deal calls for? Or is the buyer buying the assets? I’ve heard clients use the phrase “sell the corporation” when they really meant it was going to be asset sale (followed by a liquidation of the corporation) so I’d rather not assume what the deal is. You need to be clear on exactly what the sale involves, and then have a business attorney draft the sales agreement for it. If I were the buyer, I’d want provisions in there providing certain guarantees, providing the opportunity for due diligence, etc. If the buyer is not asking for that now, he/she may well ask for that later when he or she sees an attorney.

  4. #4
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    Sep 2010
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    Default Re: Transfer of Ownership of S-Corporation or C-Corporation

    Also, if it is not just a "person" but an existing corporation that is buying, there are interesting things the buyer may wish to do taxwise.

  5. #5
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    Apr 2018
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    Default Re: Transfer of Ownership of S-Corporation or C-Corporation

    Thank you all for the advice. To be more specific, someone is buying the business from us, so they will be buying all the assets along with all shares (100 shares no par val, various construction assets trucks, tools, etc.). I had met with a lawyer who advised me to dissolve the corporation and start a new one using the exact same name, but incorporate it using the new owners name, but this sounded a little off to me so I just wanted to get a second opinion. Much appreciation for all of your help.

  6. #6
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    Default Re: Transfer of Ownership of S-Corporation or C-Corporation

    Quote Quoting PHD_4_U_N_Me
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    Thank you all for the advice. To be more specific, someone is buying the business from us, so they will be buying all the assets along with all shares (100 shares no par val, various construction assets trucks, tools, etc.). I had met with a lawyer who advised me to dissolve the corporation and start a new one using the exact same name, but incorporate it using the new owners name, but this sounded a little off to me so I just wanted to get a second opinion. Much appreciation for all of your help.
    There is no point to doing what that lawyer advised you to do. Is the buyer another corporation?

    If the buyer is taking the stock then his is simply a transaction for the sale of the stock. For federal tax purposes the sale of the stock of a S-corporation to a C-corporation can be treated as though it were a stock sale if both the buyer and seller agree to that. This is known as a section 338(h)(10) election. If that were going to be done, you'd want that spelled out in the sale agreement.

    Otherwise, the liquidation of the corporation and then immediate reincorporation right before the sale will be ignored for federal tax purposes so there is nothing to gain from that. Perhaps the lawyer you consulted is not a tax lawyer and doesn't know that. And apart from trying to get a different tax outcome there is really no reason to do what he suggests.

  7. #7
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    Default Re: Transfer of Ownership of S-Corporation or C-Corporation

    Are you retaining any interest in the successor company?

  8. #8
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    Default Re: Transfer of Ownership of S-Corporation or C-Corporation

    I thank you for this information you have been a tremendous help to us. We are retiring and getting out of the construction industry. We are selling the business to a family member (1 individual, not a business) who will be taking it over. I dont know if selling is the right word, rather we would simply like to transfer 100% ownership of the business and all of its assets (less than $1 million in assets) to that family member who will run it and then pay us a share of profits for the next couple of years for which we haven't yet decided. Is this a matter of simply selling the shares to that person and then they will own the s-corp and all of its assets? Must the assets be transferred to that person in a separate transaction? All of this of course will be done through an attorney, I am just trying to get an idea what actions are necessary. Again thank you very much for your time.

  9. #9
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    Oct 2014
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    Default Re: Transfer of Ownership of S-Corporation or C-Corporation

    Quote Quoting PHD_4_U_N_Me
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    I thank you for this information you have been a tremendous help to us. We are retiring and getting out of the construction industry. We are selling the business to a family member (1 individual, not a business) who will be taking it over. I dont know if selling is the right word, rather we would simply like to transfer 100% ownership of the business and all of its assets (less than $1 million in assets) to that family member who will run it and then pay us a share of profits for the next couple of years for which we haven't yet decided. Is this a matter of simply selling the shares to that person and then they will own the s-corp and all of its assets? Must the assets be transferred to that person in a separate transaction? All of this of course will be done through an attorney, I am just trying to get an idea what actions are necessary. Again thank you very much for your time.
    If you sell the stock, you sell the entire corporation and all the assets and liabilities of the corporation go with it. What you described would be an installment sale of the stock with the payment amount being variable based on the profits. I would suggest, though that you base it instead on a percentage of gross revenue, not profit, because if you do it on profit that gives the buyer incentive to front load costs during the repayment period to drive down the profit. The gain or loss on the stock would be accounted for under the installment sale rule for federal tax purposes.

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