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What legal form do I need to complete the buy/sell of company stocks?

What legal form do I need to complete the buy/sell of company stocks?

Full question:

I am the president and shareholder of 1000 shares of stock in a Sub S Florida Corporation. I wish to purchares the shares of other members (3) at 1000 shares/member. These members wish to sell their shares. What legal form do I need to complete this transaction? What if they are not able to find their stock certificate? What do I need for them to sign to get to the final sale?

Category: Contracts
Subcategory: BuySell Agreements
Date: 04/07/2025
State: National

Answer:

A stock purchase agreement is an agreement wherein the owner of shares of stock agrees to sell the stock to a buyer. Regardless of whether a shareholder loses his or her stock certificate, that person still owns the shares. However, in order to replace the physical certificate, the shareholder must contact the company's stock transfer agent.

The corporation should be able to provide the shareholder with information on how to contact the transfer agent. The best strategy is to contact the company's investor relations department. The transfer agent will place what is called a "stop transfer" on the certificate after being notified of the loss to prevent others from cashing it in. The transfer agent or the broker-dealer will then notify the SEC of the lost or missing certificates. Once the shareholder
provides required information and purchases an indemnity bond, a new certificate will be issued.

This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.

FAQs

How do you value shares in an S-Corp?

Valuing shares in an S-Corp typically involves assessing the company's assets, earnings, and market conditions. Common methods include the income approach, which considers future earnings potential, and the market approach, which compares the S-Corp to similar businesses. It's advisable to consult a financial expert or appraiser for an accurate valuation, especially when shares are being bought or sold.

What is the penalty per shareholder for S-Corp?

Penalties for S-Corps can vary based on the nature of the violation. Common penalties include a tax on excess passive income or failure to meet filing requirements. If an S-Corp fails to comply with IRS regulations, shareholders may face additional taxes or loss of S-Corp status. It's crucial for shareholders to stay informed about compliance to avoid penalties.

How do shareholders get paid in S-Corp?

Shareholders in an S-Corp typically receive payments through distributions of profits, which are passed through to their personal tax returns. These distributions are generally not subject to self-employment tax. Additionally, shareholders may receive salaries if they are also employees, which are subject to payroll taxes. It's important to follow IRS guidelines to ensure proper tax treatment.

How do you account for S-Corp stock redemption?

When an S-Corp redeems stock, it must account for the transaction as a reduction in equity. The difference between the redemption price and the shareholder's basis in the stock is treated as a gain or loss for tax purposes. Proper documentation and compliance with IRS regulations are essential to ensure accurate reporting and tax treatment of the redemption.

How do you calculate the value of shares in a company?

To calculate the value of shares in a company, you can use several methods, including the asset-based approach, income approach, or market approach. The asset-based approach looks at the company's total assets minus its liabilities. The income approach evaluates future cash flows, while the market approach compares the company to similar businesses. Each method provides a different perspective on value.

What is the 2% rule for S Corp?

The 2% rule for S-Corps refers to the IRS guideline that allows shareholders who own 2% or less of the corporation's stock to deduct certain expenses on their personal tax returns. This includes unreimbursed business expenses. However, shareholders owning more than 2% must report these expenses as income, which may affect their tax situation. It's important to understand these implications when filing taxes.