Redistributing stock within the existing S-Corp while avoiding additional tax liabilities

Hypothetically:

The company in question is an existing S-Corp. There are four shareholders:

1: 30%

2: 30%

3: 30%

4: 10%

Is there a way to redistribute the existing stock within the company so that all four partners own equal shares of the company (25%) without having any additional tax liabilities?

Answer :

I do not think so. Changes in the ownership of S Corps are governed by shareholder agreements. While all corporations with multiple shareholders should have shareholder agreements in place, often many corporations do not have one. Shareholder agreements spell out the terms and conditions under which shareholders may buy, sell, or transfer their shares in the corporation. Transferring the ownership in an S corp is accomplished…Read more…