Expert: Ivan Jimenez - 9/17/2009

Question
I Have a S Corporation with one hundred thousand shares.  I plan on selling shares to raise start up capital. I need $20.000 to build the infrastructure of the company. I have a friend who wants to invest in my business. We agreed on 3,333 shares of stock for $20.000. I also have two team team members helping me build the infrastructure as well as operate the company. should I issue them shares and how much? Do I have to pay taxes on the $20.000 when I deposit the check into the corporate account? Can I buy the stock back from the investor after a few years?

Answer
Someone is willing to give you $20K for only 3,333 [out of 100,000] shares?! Wow. My suggestion is that you negotiate a similar deal with the other two. Regarding taxes, how you spend the $20,000 will determine if and how much tax you'll need to pay but based on he above numbers, it seems like the value of your company is high, there are partners / investors and you're dealing with significant cash. That said, you should consider hiring an accountant to manage the books for you.
---Ivan