Discussion:S corp stock not issued
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Discussion Forum Index --> Tax Questions --> S corp stock not issued
| 11 January 2007 | |
| S corp incorporation date is 3-17-06. The sole shareholder still has not issued the stock. But, the S corp has income and salary for 2006.
Has the shareholder invalidated the corporate status? What should be done now that it is time to prepare the W-2 and 1120-S? If the stock is issued now, what will the capital section of the balance sheet look like for 2006? Thank you for your answers. | |
| January 11, 2007 | |
| I'm not an attorney, so with that disclaimer....don't worry. Many many many small corps never 'issued' the stock in the sense that's there's some meaningless certificate around. Consider it issued the day the money went into an account and the owner took charge. It's a piece of paper, validating what was already done in real life. Forget it. | |
| 11 January 2007 | |
| For tax purposes, I agree completely with JR1. For CYA reasons, though, I always advise my clients to run the corporation correctly. That includes issuing stock, minutes of annual meetings, etc. Now, none of my clients actually do all those things. But if they are sued and the corporate viel is pierced, they will not be able to accuse me of not giving them needed professional advice. | |
| 11 January 2007 | |
| Read the articles of incorporation. that document should indicate the par value of the stock. Not all stock has to be issued. But you must include the correct amount for the common stock or it can be picked up as an error on the tax return. | |
| January 11, 2007 | |
| And if the stock has not been paid for, it can be recorded as stock subscription receivable on the books. | |
| 11 January 2007 | |
| I also am not a lawyer, but I do know that some states don't let you have subscriptions receivable for at least original stock....have to pay for initial stock.(need money in corporation for liability). But I don't think this actually has to be "cash" a lot of clients put in assets in exchange for stock. So he may have paid for it, and issued it, but lawyer just didn't print certificate yet????? | |
| 11 January 2007 | |
| I appreciate that you all took the time to answer my question. | |
Www.cpa1.biz (talk|edits) said: | 31 March 2009 |
| How does ownership work when all of the shares of stock are not given out and there is a subscription.
For example, An S corp starts in 2008 and has 5,000 shares. They issue 2,500 shares to the owner and 2,500 are outstanding subscription for next year to give to other shareholder/owner when someone buys in. 1) Does that mean in 2008, the only person who has the shares of 2,500 is the 100% shareholder for the S corp return? 2) Now in 2009 if someone buys 2,500 shares of stock, are they now the 50% owner since 5,000 shares are issued? What else I am trying to find out is if ownership percentages are based on shares issued rather than shares outstanding. Please advise. | |
PHIL MOODY (talk|edits) said: | 31 March 2009 |
| What did they do, lie on their IRS form to elect S status?
I hope not. | |
