Legal Question in Business Law in New York

Transfer of S-Corp Interest

L is a sole shareholder of FPPT, an S-corp. L wants to open another clinic with G, under FPPT. G is going to be 50% owner in the second clinic and 0% in the first clinic. Does L need to make changes in the corporate book and how is it done? Is there another way of going about this without the need of establishing another S-corp for the second clinic? How can G be held responsible for 50% of income and expenses in the second clinic?


Asked on 9/29/03, 6:57 pm

1 Answer from Attorneys
Louis Venezia Law Offices of Louis Venezia at Union Square, P.C.

Re: Transfer of S-Corp Interest

I strongly recommend the establishment of a new �S� corporation for the new clinic. This method isolates liabilities solely to the new clinic, avoids confusion in terms of ownership responsibilities and entitlement to profits, and avoids future claims of entitlement to any part of FPPT by G. You can have numerous S corporations which provide the same tax benefits. However, if for some reason you find it necessary to work under the umbrella of FPPT, I would recommend making FPPT a 50 percent shareholder in a new corporation (and not L) and G will own the other 50 percent. The balance of your concerns would be resolved by a shareholder's agreement which should be prepared by a lawyer. (Typically, such agreements can be 20 or more pages long if they are done correctly). Only a written agreement will avoid disputes that end up in litigation in the future. Changes in the stock book, or more importantly, to the certificate of incorporation of FPPT, could only be determined by a review of the documents.

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Answered on 9/30/03, 9:59 am


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