Discussion:Adding new director to S-corp
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Discussion Forum Index --> Tax Questions --> Adding new director to S-corp
| 13 May 2008 | |
| I am 51% stock owner and my wife is 49% stock owner in the s-corp.
1. How do I add, my kids (14, and 16 year old) to an existing corporation ? 2. Can I add them any time of the year or there is best time to do this ? | |
| 14 May 2008 | |
| Are you talking about Directors or Shareholders? In either case all you have to do is wish for it and it will happen. Just don't forget to write it down somewhere.
Of course it begs the question....Why? | |
| 14 May 2008 | |
| I do not get it. So when the corporation taxes will be done next year, Corp, issues four K-1 forms.
1. Don't we need some sort of paper work to show who owns how many shares? 2. Should the shares be gifted to the kids in the paper work? 3. Is there tax benefit by adding kids to s-corp? | |
PHIL MOODY (talk|edits) said: | 14 May 2008 |
| Recommend you consult with an attorney. I would doubt that a 14 or 16 year old would be legally eligible to be a director. | |
| May 14, 2008 | |
| And I think you've got some confusion of your own Terry, since your post is about directors, and you really now are talking about Shareholders. They are not the same. As Rkr asked, what's it you're tryin' to do anyway? There can be advantages from an estate planning aspect perhaps. Perhaps. | |
Michaelstar (talk|edits) said: | 14 May 2008 |
| Terry - as has been voiced above, you really need to see someone qualified to assist you with overall estate planning before you actually go through with making your children s/holders to confirm that this is a good move.
As far as directors - while I am not sure there is a legal age when one can be elected as a board of director, I would certainly question your motivation as to why you would want children that age on the board. Certainly if you were subject to any kind of government regulator oversite on directors - that would not be allowed. | |
| 15 May 2008 | |
| I want kids to be share holder and not directors. Isn't this way when s-corp profit pass through, kids share will be taxed at there tax bracket ? | |
| May 15, 2008 | |
| Yeah, you're on the wrong road, get a good tax pro to guide you. | |
| 16 May 2008 | |
| Of course this is a legal question, but you'll probably find out that it can't happen. Generally speaking, if a minor cannot enter into a contract, how could they bind themselves with the business? I'm assuming there is some type of shareholder agreement somewhere? The only way I could see around this is an emancipation, which no court would probably allow.
I'm not too sure I'd be happy if my father did that to me with the family business. I don't need more passive income, which could potentially harm their financial aid when (and if) they plan on going to college. | |
| 16 May 2008 | |
| I know you can open kids account (UTMA)and take advantage of interest they earn. So why cannot a kid be a share holder in company, where company is run by elder ? | |
| 16 May 2008 | |
| Terry, you are way out in left field here. It is true that a child can be a shareholder in an S corporation, although probably not an officer or director. But transferring stock to the children may create a lot of problems and little or no tax benefit. If a child under the age of 18 has more than $1,800 of unearned income, such as interest on an UTMA account or distributive share of income from an S corporation, the kiddie tax rules essentially tax that income at the parents' rate rather than the child's rate. So there is little or nothing to be gained tax-wise by transferring stock ownership to the children. (The $1,800 amount is for tax year 2008; it is indexed annually for inflation.)
On the other hand, doing so can create problems going forward from an estate planning and family financial planning perspective. Once you have transferred property to the child, it's the child's property, and the child can do what he or she likes with it when he or she becomes an adult. Also, as LemRI points out, having property in the child's name may limit or eliminate the opportunity for financial aid for college. These are just examples of the potential pitfalls. You sound like a do-it-yourselfer. Don't do anything without consulting a qualified tax professional. | |
