Legal Question in Business Law in California

Re: What form to use?

I assume by "form" you mean a paper document with some pre-printed language and a bunch of blanks the participants in this transaction would fill in with their names, the percentages each was to "own," etc.

No such form exists.

There are thousands of forms in existence, used for a varierty of purposes, and published by a variety of sources, including appropriately enough to mention on April 15th, the IRS, on down to the registration card you fill out at the hotel desk.

However, forms are not available for non-routine transactions. At best, you might be able to locate what I'd call a "template" or model agreement which could be copied, with minor alterations, to fit your purpose, but it would not be a fill-in-the-blanks form, it would be at most a guide to finding the right language to express the details of your transaction in a newly-created but somewhat copycat contract document.

Even finding a suitable template for what you have in mind would entail a far-reaching search on line or at a law library, and my guess is that after hours of searching, you'd find nothing that was sufficiently similar to be of much use.

On the other hand, a lawyer of average experience in writing contracts could interview the three of you, take notes on what you want, and produce a one or two-page contract for a few hundred bucks. That's why we go to Law School.

By the way, your proposed transaction may have some conceptual flaws. It is somewhat risky for someone to own an interest in stock without being the "holder of record" on the issuer's stock-transfer ledger. An owner who is not "of record" won't get dividend checks, annual reports, additional stock if there is a split, or get meeting notices or have the right to vote at the annual meeting. Worst of all, they will not be able to sell when the time comes.

Further, proposed transactions look like an attempt to skirt the investor qualification rules and perhaps the selling company's minimum-investment and maximum number of purchasers rules.

Re: What form to use?

"Form"? Nice try.

You need a written agreement, specifically drafted for the intended purposes, with language to protect the interests of all parties. You also have to have the corporation properly document and approve of the transactions, and provide the state the proper notices and disclosures. That's what attorneys get paid for.

However, as Mr. Whipple has pointed out, the Corporate Commissioner and the State of California will likely take a dim view of what you're doing if you're trying to avoid proper disclosures and legal requirements. If you're actually trying to a shareholder agreement and/or stock purchase agreement, then that's what needs to be drafted. You'd better get some proper legal advice before doing anything. Feel free to contact me if you get serious about doing so.