ownership in an s-corp?

Question

The company is currently owned by my family, but will be eventually transferred to me at no cost. Instead of waiting for the actual day to receive full ownership, and pay to the IRS a lot of taxes, I was told i can be given a certain percentage ownership each year tax free. Is that correct?, and how much is the max per year ..

Answer 1

As always consult a business attorney. Having said that the S corporation allows for more investors but protects like Limited Liability Partnership instead. Which means that the money the company makes passes onto the shareholders & those those people pay the taxe for their share of the income & company without being doubletaxed. You can became an investor being gifted shares & then over time increase your stake without anyone being taxed. As time goes on & you take more controll you can process other owners out with no expense to anyone. There are limits I believe gifts can only be $10k so anything more then that you would have to claim & be taxed on as well as the person giving it to you. I've also heard that you can have the company issue basically stock options if you will which you are only taxed on when you excerise them.

Answer 2

Right now, $12,000 worth a year. By each parent. So, if you have two parents, they could each give you their $12K giving you a total of $24K a year. Of course, you can't sell this stock on the open market, so you can take a discount, allowing them to give more then the $12K. 25% discount is a safe amount. Letting them give you $15 or 16K each. People get in trouble with audits when they take too big discounts. I think the case that caused all the audits was cuz some moron tried to claim a 75% discount.

In response to the answer above: S-corp gives the advantage you're talking about. In certain states, an LLP can only be formed by certain professions. For many small businesses, an S-corp is the ideal entity to use.