Tax Law (Questions About Taxes)/Corporate Ownership


QUESTION: William,
I formed a new S Corp this past May. Filed IRS Form 2553 indicating percentage of ownership. I am 51% owner. The other 2 were given ownership in exchange for investment. However, they have not fulfilled their obligation. Can I simply file a new 2553 changing ownership percentage?
Additionally, we issued 50,000 shares of stock with no par value when we incorporated so as I understand that, the corporation owns those shares and the corporation can sell them, is that correct? And if so, how do I now assign a par value? Thanks so much for your help!


ANSWER: You asked if you should file a new 2553.   The answer is No

You then asks about the 50,000 share and I asked for follow up information about the other shareholders. And their failure - what did yet do wrong or fail to do and if they agreed to go away (or did you have to sue them or otherwise induce them to give up their ownership was implied and if you have that agreement in writing)

You gave paltry information and expect me to figure it all out on what was provided

I answered the first question accurately (no, unequivocally) and require more information to guide you in the second half of your question

Answer MY questions and you will get more information....

But to be honest, you got a 10 reply.    

Do not file new 2553

What did other people fail to do?

Did they agree to go away?

Do you have that in writing?


---------- FOLLOW-UP ----------

QUESTION: Sorry William. I appreciate your time, I'm just seriously in the weeds. 2 investors both committed $10K a piece in exchange for 24.5% ownership. One wrote a check for the full amount right away, the other had a temporary issue and committed to provide the funding shortly thereafter. So, in good faith, I filed the 2553. Now it's 7 months later and he has given bits and pieces here and there totaling $1700. He has not agreed to "go away" and I have not pursued any legal action to date. And unfortunately, this was a deal between friends and no, it's not in writing. I'm in a cash crunch, have plenty of receivables but, as happens in business, payment is behind what I owe my consultants and as a result, am in need of a new investor and FAST. That's why I'm wondering about the shares. There are no other partners/shareholders/board members, the shares were only issued to the co. at the time of incorporation and the were issued with no par value. I've been self employed before but not with an S Corp so I don't know what the company can do with the shares or how to assign a value. I'm presuming that if I find another investor, they will want something in exchange and clearly I can't give any ownership percentage so I was thinking I can sell them shares of the company. I may be totally wrong. I'm just trying to figure it out quickly. Thanks.

i am patrick medusa... not william

you dont file a new 2553... you dont need to assign a par value (that usually only has an issue with the secretary of state for your home state.  not an IRS tax issue.

essentially, you have to "sell" him his pro rata shares.  you can offer to sell more shares to other people (and dilute them).

you need real help.  live cpa and lawyer. not a free chat board.

send me a new question but mark it private. I'll provide contact information.


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19 years cpa. ms tax. NOTE: My discussions are only a general information and do not constitute tax advise without entering into a specific agreement and executing an engagement letter; This free chat is nothing more than general information and should not be construed as tax advice nor does my response or replies imply an agreement to provide client specific advice or other guidance for purposes of avoiding IRS tax or penalties and should not be relied upon without your own validation and confirmation of the how the discussion may fit your facts... Not having all the facts and/or not having a direct client relationship prevents me from providing the most accurate replies as possible and I highly suggest using a local CPA to provide you with written advice and guidance. Taking matters into your own hands is much akin to trying to land an airplane without a license. It is easy to FLY a plane, but LANDING is when critical experience is key. In short, caveat emptor; do your homework and don't just rely on free chat board advice anywhere, anytime.

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