QUESTION on How to Issue Stock on a C Corporation
I am in the process of forming a C corporation. There is confusion as to how many shares of stock to issue, 75,000 100,000 5, (an even number). Also, should I give myself the majority of the shares and what amount should I give my wife and kids? Also, should I have my wife and I as joint tenants in common on the majority shares as an additional asset protection against potential law suits against myself?
– Stephen M, NY
ANSWER by Yvonne Buchanan
Shares of stock in a corporation are not issued arbitrarily–corporate stock is generally issued in exchange for property or services.
Section 504 of the New York Business Corporation Law states, in part, that “consideration for the issue of shares shall consist of money or other property, tangible or intangible; labor or services actually received by or performed for the corporation or for its benefit or in its formation or reorganization; a binding obligation to pay the purchase price or the subscription price in cash or other property; a binding obligation to perform services having an agreed value; or a combination thereof.”
Joint Tenants in Common accounts are typically set up for stocks and other equities to address what happens to the interest owned by a tenant/spouse in the event of his or her death. In the event of the death of one of the tenants/spouses, the deceased’s interest passes to his or her estate and not to the surviving tenant/spouse. The surviving tenant/spouse is only entitled to his or her pro rata portion of the account before the death of the other.
One common asset protection strategy that comes to mind is the use of a family trust, but you should consult an attorney for asset protection strategies and advice on structuring the ownership of your corporation.
Recommended Resources on Forming a C Corporation:
- 300 Business Deductions Available to C Corporations: List Of Over 300 Possible Deductions Every C or S Corporation Should Be Aware Of To Legally Minimize Their Taxes
- C-Corporations: Small Business Start-Up Kit (Small Business Start-Up Kits)
- Surprisingly Simple: LLC vs. S-Corp vs. C-Corp Explained in 100 Pages or Less
- Small C & S Corporations (Series 200: Investors and Business)