How do I purchase shares within my Corporation?

Asked about 1 year ago - Saginaw, MI

I converted my LLC into a Corporation and I as sole Incorporator already elect myself as sole Director until the Shareholders First Annual Meeting is adjourned, but there's no shareholders. So I wanted to know how do my Corporation (I as sole Director) issue shares unto myself (I as sole Shareholder)? And can my Corporation (I as sole Director) issue a paper stock to myself (I as sole Shareholder)?
I have a Stock Purchase Agreement drawn up and I will record and place this in my Corporation Minute Book. Is there anything else I need to know before proceeding?

Attorney answers (3)

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    Answered . The corporation can issue shares to you in exchange for your membership interest in the LLC or the corporation can issue shares to the LLC in exchange for its net assets. Either way the transaction needs to be properly documented. I urge you to consult a business attorney.

    You haven't identified the other parties involved in this question so I cannot determine whether I may have a... more
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    Answered . It is not only allowed but it is mandatory that the Corporation issue shares to you in return for whatever your formation capital was (if there was any besides your LLC membership), both for tax purposes and for formation purposes. Since ownership in a corporation is reflected solely by ownership of shares. The number of shares authorized (which must be stated in the formation documents) should be high enough to comfortably accommodate any future shareholders you wish to bring on board. The number of shares issued to you should reflect consideration of 1) the par values your state incorporation laws require (number of shares times the per share price); 2) the amount of control you wish to retain when you bring on other shareholders (ie, if you authorized 100,000 shares and issue 50,001 to yourself you will ensure that you will always have control). The number of shares is something many attorneys consider to be arbitrary and not worth a lot of thought. Also, some states may have more stringent requirements for the number of shares issued by a corporation, since incorporations are a product of state law.

    As a last note, a Delaware corporation will pay higher fees for higher par values, but Delaware will allow a new corporation to set share prices arbitrarily low to maintain a lower par value.

    This is intended only as a general commentary on the question asked, it is in no way intended as legal advice... more
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    Answered . The other issue is the number of shares that are authorized and the number of shares that are ISSUED. You can authorize 60k shares for the minimum corporate filing fee. Any more than that requires paying an additional fee. If you will always be the sole shareholder, it does not really matter how many shares you issue. If you *might* sell some or all of your interest in the corporation, at some point, you may want to hold back a certain number of shares for that purpose.

    In other words, you could issue 10k of your 60k authorized shares to yourself, and keep the remaining 50k shares available for later issue.

    James Frederick

    ***Please be sure to mark if you find the answer "helpful" or a "best" answer. Thank you! I hope this helps. ******... more

Related Topics

Incorporating a small business

Incorporation is the act of forming a corporation, a separate legal entity whose rights and liabilities are distinct from its shareholders.

Small business LLCs

An LLC (limited liability company) is a business entity that has elements of both a corporation and a partnership (or sole proprietorship).

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