QUESTION

part owner of C corp dies--what happens to outside investments

Asked on Oct 01st, 2020 on Estate Planning - Ohio
More details to this question:
Situation: c-corp with 3 shareholders Owner A has 51% of the company's shares, therefore controlling interest company owns a fair amount of stock in company B worth about $2.5 million (Owner A's name and company name are on the account at computershare) company, without the company B stock, is worth about $3 million upon death, Owner A's company shares go into a trust with the 2 other owners having first right to purchase owner's company shares Trust then has controlling interest. Question: what happens to the stock of company B when owner A dies? 1) it should be counted as part of the overall total of the appraised value of entire company? 2) does 51% of stock from company B go into owner's trust and divests itself from the company when it goes into the trust or does company retain ownership? 3) can owners B and C use the stock to buy out owner A's company shares? In this case owner A's total worth in the company with the investment stock is $5,500,000 * .51 = $2,805,000 buy out price
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1 ANSWER

Wills Attorney serving Austin, TX
2 Awards
A controlling interest is not the same as ownership.  Company B stock belongs to Company A, not to whomever may have a controlling interest in Company A.  (1) Company B shares are part of the overall appraised value of Company A. (2) Because Company B stock belongs to Company A, not to whomever may have a controlling interest in Company A, unless the operating agreement provides otherwise, Company A retains ownership. (3) The co-owners can use stock, rather than cash, to buy out the decedent's interest in Company A only if (a) the operating agreement so provides and (b) the decedent's estate is willing to accept stock instead of cash. Please hire a local probate lawyer experienced in settling estates involving small companies.   This is not a DIY project.
Answered on Oct 02nd, 2020 at 6:08 AM

This is general information. It cannot substitute for a personal consultation with an attorney. It is not intended to be legal advice or imply an attorney-client relationship.

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