Minority shareholders can be left wondering who will take control of the deceased shareholder's ownership interest and how the company will be managed going forward. If you and your business partners are smart, you should already have a plan in place to control ownership changes and management issues upon the death of a shareholder.
Shares of stock in a corporation -- including an S corporation -- are a shareholder's personal property. When a shareholder dies, his shares become part of his estate and pass to his beneficiaries. The new owner of the stock steps into the shoes of the deceased shareholder. Business can go on as usual because a corporation is an independent legal entity that continues to exist even as shareholders change.
An S corporation is typically a closely-held small business with a limited number of shareholders. We can help. We can also help you craft just the right language for the solutions to these eventualities. You can reach us immediately either online or by phone at or toll-free at Email address:. Nonqualified Owner Upon the death of the S corporation's principal, the decedent's shares pass to the individual's estate—not to other shareholders.
Surviving Heirs Upon the principle's death and unless provided in a will otherwise, the shares pass to heirs, who may or may not be interested in the business.
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By Nasir Pasha. Take these three steps: Step one — work with an attorney to create a result that you intend. Step two — determine a business structure that suits you for tax and liability purposes.
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