Legal Question in Business Law in California

First, understand that there are three different ways to make your wife a 50% owner, if she isn't already by virtue of the community-property laws. Let's assume you hold "of record" all 1,000 shares of stock your company has ever issued.

Way #1 is to transfer all 1,000 shares on the company's books from "John Doe" to "John and Mary Doe, husband and wife, as community property" (or "as community property with right of survivorship"). They will then co-own the 1,000 shares, 50-50.

Way #2 is to have the corporation issue 1,000 additional new shares to Mary, as her separate property. As part of the deal, Mary, John and the corporation should probably execute a simple document acknowledging in writing that Mary's 1,000 shares are to be her separate property and that John's 1,000 shares are his separate property. Each will then own 1,000 shares, or 50%.

Way #3 is for John to make a gift of (or sell) 500 of his shares to Mary. Each will then own 500 shares, or 50%.

#3 is probably the most straightforward, but any of them may be preferable in different circumstances. The following caveats need to be observed:

The changes in ownership, etc. need to be reflected in the corporate secretary's register of shares and shareholders. If the corporation has issued share certificates, one or more new certificates need to be issued and maybe an old one cancelled to reflect the transaction. If the corporation is an "S" tax-election corporation, the new shareholder needs to execute and file a consent (see IRS Form 2553 instructions). Don't issue more shares than are authorized by the Articles of Incorporation. Note that a corporation with two shareholders must have at least two directors (who need not be shareholders). If the shares have significant value, there may be tax or fairness issues in making a gift (probably not a problem if everyone affected consents). The corporation's accountant and tax advisor should be consulted.