Legal Question in Business Law in California

Re: Initial stock issuance

I need more info before I can advise. For a deal of this kind, you definitely need an attorney to consult regualarly. Contact me directly, if you feel necessary

Re: Initial stock issuance

Your question did not indicate what type of entities you are merging into the corporation. By your question, it sounds like you are simply contributing assets from two partnerships/sole proprietorships into a corporation. You really need to speak with a CPA about how to value the assets for transfer so that you avoid a tax on the entities that transfer the depreciated assets for stock as well as speaking with an attorney so that the transfer is properly completed.

Re: Initial stock issuance

You can do it legally either way, but as you understand, the tax impacts upon the entities involved and their owners will be very different. This is more of an accounting and tax question than a strictly legal question.

The best approach would be to have a tax accountant give you the short- and long-term tax consequences on each individual and entity in dollar impacts. Then the affected individuals can negotiate, keeping in mind that a future impact is less consequential, dollar-for-dollar, than a current impact because of the time value of money.

There is a preference for transferring assets at current fair market value, other things being more or less equal, so that the transferee's books reflect its true financial condition.

If the dollar amounts are significant (say, into five figures) you should consult a tax accountant and perhaps a business attorney.

If the entities being merged into the new corporations are also corporations, you will need Franchise Tax Board clearance and to clear other legal hurdles to carry out the merger. In such a case, you'll really need a lawyer's assistance unless you are really very familiar with corporate governance matters.