Legal Question in Business Law in Virginia

Re: legal procedures and regulations for transferring shares of an S-Corp

It would be a good idea to consult an attorney about how to do this properly. I would be happy to refer you to someone in the Lynchburg area if you like.

Re: legal procedures and regulations for transferring shares of an S-Corp

I cannot see why this would be illegal.

It is quite normal to issue shares of stock in return for work, just as shares can be issued in return for money.

Perhaps they are thinking that it sounds like "barter" -- as in, an attempt to avoid reporting income for income tax purposes.

To the extent that you are paid anything of value in return for work, you will have income that is taxable as income tax at the value of what you have received.

Accounting for this in a stock situation is very tricky precisely for the reason that the stock is not worth anything now but it might be worth a lot later. It might also be considered just making an investment.

However, I am not sure why you want to organize it this way, between husband and wife. A spouse can give an unlimited amount tax-free to the other spouse, without counting it as salary for work. If you own some of the company you can do work for "your" company as a contribution of capital, and it will not be income.

If you are concerned about protecting ownership of the company, there are many far more sophisticated techniques for doing that, and there are companies that can help you do that. However, they cost some money and unless the company is making good money, it may not be worth it.