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Liquidating an S Corp

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    #16
    So you already owned the S corporation prior to anyone else. And then other investors contributed money after the corporation was in existence for a while, and they paid fair market value at the time for their 50% share.

    OK, that is different.

    Lets say you contributed $2,000 out of your pocket for a 100% share of the S corp. You invented whatever it is your corporation does. Then to attract additional capital, you have 5 others put in $2,000 each, but by this time, it is some time after you put your money in, and the value of the corporation increased.

    100% of the value of the corporation cost $2,000 on the date you contributed your capital, but 50% of the value of the corporation cost $10,000 (5 X $2,000) on the date the other 5 investors bought into your corporation, leaving you now with 50% of the corporate stock and them with the other 50%.

    That is OK. No two classes of stock here, because the unequal cost is due to the appreciation of the value of the stock between the time you invested and they invested.

    It would only be two classes of stock if you all put in the same amount at the same time for unequal shares of stock.

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      #17
      Much appreciated

      Sorry I was not more complete on original request. Thanks for your expertise.

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