AboutMichael N. Brette,J.D. Expertise I provide capital for public companies from $100,000.00 to $20 million. I assist companies in structuring their private placement offerings, raising capital, going public via reverse merger or S-1 registration.
Experience I have invested over $3 million in emerging growth companies and helped companies raise million of dollars from hedge funds, private equity funds and accredited investors.
Organizations I am a Founding Member of the Southern California Investment Association. Members of SCIA are private investors, broker dealers, venture capitalist, investment managers, private equity funds. We have funded $100 million in transactions every year since 2000.
Publications I have published two books Raising Capital For Your Business and Asset Protection Planning (Amazon.com).
Education/Credentials I have my Juris Doctor(Law Degree) for 30 years.
Awards and Honors I am listed in Who's Who in the World and Who's Who in Industry & Finance.
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 Thank you for the email. I am not sure why you formed an S corporation with all the IRS rules to comply with. Big mistake. If you did it because of tax reasons you should have formed an LLC (Limited Liability Compnay). It has the same tax befefits without the IRS filings. S corporations have limitations on who can own stock in the S- corporation
Second, you cannot just issue stock to any one with complying with state and federal security laws. Get a good attorney before you do any thing else.
You pay taxes on incomre. Is the $20,000.00 income or is it a loan? Get a good CPA.
