Legal Question in Business Law in Massachusetts

Re: Family transfer

This transaction should be either be performed by or after consultation with an attorney, and possibly your accountant.

Your message does not say whether you are buying the shares or whether they are being given to you and your brother. If the transfer is a gift, there may be tax implications - which could be either positive or negative - for your parents.

Regardless of whether the transaction is a gift or a purchase, the value of the 85% should be determined for your tax purposes, as the present value becomes the basis of your interest in the company. This will become important in terms of any gains that may occur if and when the business is sold.

In addition, it is not clear whether you and your brother would hold the shares as tenants in common or joint tenants (w/rights of survivorship). These issues are important in the event of a death or divorce of an owner. You and your brother should have a "buy/sell" agreement to cover these and other contingencies.

I hope the above information is helpful. Please feel free to contact me at 401-885-7200 if I can be of further assistance.

Re: Family transfer

The actual physical transfer of the shares can be done by the appropriate officers of the corporation. Your parents would have to properly endorse the shares over to you. The shares properly cancelled and new shares issued.

However, there are some very important tax issues that you all need to analyse before doing this:

If this is a gift, does it exceed the annual gift exclusion rules? if it does there are gift tax implications.

If this is a sale, was it done at a fair market value? if not, and I am going to assume it is less then gift tax questions arise as well.

If the business has little or no value the questions and issues above stated have little impact on what you do.

However, if this is part of an estate plan it should be checked by the attorney who created the plan for you.

If no one has reviewed what you are about to do to make sure it has no tax implications or at least lets you know in advance what those implications could be, then you should have that done. There are other potential issues that may relate to convenients with Banks who lend to the business and a variety of other issues that may impact the transfer itself.

But the physical exchange and re-issue of shares does not require an Attorney, although they frequently prepare all the documents in such cases for you including any minutes that might be appropriate under the circumstances.

I have attempted to answer your question based on the limited facts presented. There may be facts that would alter my response and as such this should not be relied upon as formal legal advice.