Business & Finance Finance

How to Issue Stock to Raise Capital in a Subchapter S Corporation

    Selling Shares in an S Corporation

    • 1). Determine how many shares you want to sell and their par value. Par value is the lowest price at which you are willing to sell the stock.

    • 2). Identify a buyer. In many cases, you will be selling part-ownership in an S corporation to a family member, former competitor or industry colleague.

    • 3). Review the restrictions on ownership in an S corporation. IRS rules prohibit nonresident aliens from owning S corporation shares, for example, and you cannot have more than 75 shareholders. You also cannot issue more than one class of stock.

    • 4). Document the sale. You will need to provide the stock buyer careful documentation on the purchase price and date, so your buyer can calculate his or her own cost basis.

    • 5). Calculate possible capital gains taxes or losses on the sale. You may be liable for taxes on capital gains. You may be able to use capital losses to offset other capital gains, or offset up to $3,000 against income in any given year.

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