How to Transfer Shares of Stock Within a Corporation

Follow procedures to transfer shares of stock within a corporation
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Shareholders of corporations may transfer, sell, assign, or gift their shares as they see fit, so long as the transfer complies with any shareholder agreements that have been signed. Not all corporations have shareholder agreements in place, but any corporation with multiple shareholders should have a written agreement regarding the transfer of shares. There are some procedures that should be followed when transferring shares of stock within a corporation and, if followed correctly, the transfer will be both legal and final.

Step 1

Check with your shareholders' agreement. As mentioned in the introduction, many small businesses with multiple owners have a written agreement that will spell out the terms of any share transfer, including a formula to calculate the value of the shares, a restriction on who may own the shares, and any rights of first refusal to purchase the shares. If you have signed a shareholders' agreement, consult it before proceeding.

Step 2

Value the shares. Assuming that there is no shareholders' agreement in place to value the shares automatically, you must assign a realistic value to the shares to comply with IRS gift rules and to ensure that if you were audited there would be no issues with the transaction.

Step 3

Execute a purchase agreement. A purchase agreement is a legal contract that transfers ownership of an asset, in this case corporate shares, between two parties. Once the purchase agreement has been signed, the share certificates should be updated to reflect the new owner.

Step 4

Record the transfer on the corporate record books. In addition to changing the title on the share certificates, the corporate record books should also be updated to reflect the change in share ownership by adding an entry to the stock ledger that lists the current shareholders.

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