How to Have a Corporation Own Shares in Other Corporations

A corporation is a legal entity that is owned and operated by any combination of individuals, companies and corporations. As a separate legal entity, it is the corporation that is held liable for debts and other legal statutes, protecting owners and shareholders from being sued. A corporation's shares are ownership of an amount of control in the corporation. The more shares one owns, the more control one has over the corporation.

Instructions

Difficulty: Moderate

Things You’ll Need:

• Stock broker or financial professional

1. Develop a sound investment strategy. You want to turn a profit, of course, but you'll also need to calculate your corporation's level of risk tolerance.
2. Speak to an accountant or hire one to work for your corporation. An accountant can provide both advice and service, especially when it comes to purchasing shares in another corporation.
3. Have your accountant or legal counsel contact another corporation to find out if partial ownership or even a merger is a viable option. Sometimes stronger business partnerships can have a much more beneficial effect on your business.
4. Plan on spending at least a few days talking with other corporations before discussing owning shares in their business. Negotiation is a key element in most major stock transactions, particularly between corporations.
5. Have contracts drawn in order to make the stock transactions completely legal. These contracts can be used as proof of transfer in the event that legal action is required in the future.
6. Ask that actual paper shares be issued between corporations. This serves as physical evidence of your ownership in the other corporation.

Tips & Warnings

• It is not a requirement for a corporation to employ legal counsel, but it is advisable, particularly if the corporation is going to be publicly traded. Make sure to hire an attorney who specializes in corporate law.
• Be aware that some corporations will buy shares in another corporation aggressively with the intent of taking over control. This can end up having a direct effect on the power structure or direction of the corporation.
• Often there are taxes associated with any dividends or profits earned on shares of a corporation. Tax credits are available, depending on the state and local statutes, so be sure to speak to legal counsel for details.