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Ask a Lawyer -- Corporations
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Brought to you by MedLawPlus.com®-- Corporate Bylaws and initial board of directors resolution Price: $14.99 (free trial) |
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Question: Business Law Question? I just changed my small business from sole proprietorship to a corporation. We can file on line with the State of Washington. I submitted as # of shares of stock as 5000. Do I own those 5000 shares on paper (my wife is listed as the vice president and secretary and I am listed as the president and treasurer and we are both listed as directors). We are a community State and the S-Corporation papers seem to suggest not to list both husband and wife as owners of the stock. How do we "purchase" the stock if we are not the owners of the stock? Thank you for any help you can give us. Response: I think there is some confusion here. If I understand the situation correctly, you have formed a new corporation in the State of Washington through filing articles of incorporation with the Secretary of State's office. In the filing, you listed the shares of authorized stock as 5000. These are the maximum number of shares the new corporation is "authorized" to issue to shareholders. The next step in this process is for the incorporators to appointing of the initial board of directors (see MedLawPlus.com® article on steps to forming a corporation). The initial board of directors then appoint the initial officers of the corporation and adopt bylaws. MedLawPlus.com® sells forms for the steps mention above, Link. It is only now, after the steps outlined above, that the corporation is in a position to "issue" shares of stock (authorized and issued share of stock are two separate concepts). A corporation could, for example, have 5000 authorized shares but only have issued 1000 to shareholders. At this point, you would transfer all of the assets of your sole proprietorship into the corporation in exchange for shares of stock (could be 5000 or a lesser number). In tax terms, this is called a tax-free Section 351 transaction. The mechanism for the issuance of the shares of stock is set forth in the corporation's bylaws. Also, here is a link to a seller of blank stock certificates on the web. As far as whether the shares are in your name alone or both yours and your wife, that is for you to decide. If the shares are titled in your name alone, I do not think it would affect whatever marital rights you wife may or may not have in those shares under Washington law. Submitted: 2-7-2006; Geary, Washington Response: 2-7-2006; JJR Add A Comment |
Ask a Lawyer, Corporations Archives
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