How to Start a Family Corporation to Transfer a Parent's Assets

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A family corporation is simply an ordinary corporation in which all shareholders are members of the same family. You can use a corporation to transfer your parent's assets to other family members by transferring these assets to the corporation and naming family members as shareholders. This can protect the assets from your parent's creditors. Setting up a corporation is a fairly simple process, although the exact details vary somewhat from state to state. You don't have to establish your corporation in the state where your parent's assets are located.

Choose a name for your corporation. Your name must include some indication of corporate status, such as "Inc.", "corp", or "LLC". Most states maintain a search function on the website of the secretary of state that allows you to check your proposed corporate name against business names already in use. Use this search function to confirm that your proposed corporate name is unique.

Read More: How to Establish a Family Corporation

Appoint directors and officers for your corporation. Most states require that you appoint more than one director, for example, California requires at least three. Appoint at least a president and secretary.

Complete the articles of incorporation. Some states offer a standardized form, while others require you to draft your own form. This document is usually only a page or two long and requires you to list the name of the corporation, the names of the directors, the name of the president and secretary, the corporation's principal place of business and its number of authorized shares.

Submit the articles of incorporation to the secretary of state of the state under whose laws you are incorporating, along with the statutory filing fee.

Draft corporate bylaws if your state requires them. Corporate bylaws function as a company constitution, setting out the rules by which the corporation is to be governed. Examples of provisions commonly found in corporate bylaws include how many shareholders' meetings must be held per year, what constitutes a quorum, and what corporate decisions shareholders, rather than directors, must decide. State law prevents you from inserting certain provisions in bylaws such as authorizing the board of directors to sell the assets of the corporation without shareholder approval. Some states do not require bylaws; no state requires you to file bylaws with any government agency.

Draft an asset transfer agreement in which your parent sells his assets to the corporation. To make the contract legally binding, the corporation must agree to pay at least a small amount for these assets. The purchase price need not be paid at the time of transfer -- payment can be delayed to a future date, and can be made from the assets that were originally transferred by your parent.

Issue share certificates to the family members to whom your parent wishes to transfer assets in proportion to the amount your parent wishes each member to receive.


  • If you transfer assets to a family corporation at less than their fair market values, you might become liable for federal gift tax.

    Although the corporation's limited liability will generally prevent creditors of the shareholders from reaching corporate assets, if your parent transfers assets to the corporation to avoid paying pre-existing debts, a creditor may petition a court to declare the asset transfer agreement void and reverse the transaction, allowing your parent's creditors to seize corporate assets.


  • Corporate shares represent ownership of the corporation, not direct ownership of the assets themselves. To transfer the assets themselves, the corporation can use a variety of methods such as the distribution of dividends, the sale of corporate shares to outsiders, and the sale of corporate assets for shares.

    The formation of an irrevocable trust can also serve the purpose of transferring a parent's assets to family members without exposing them to the claims of creditors.

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