An S-corporation is a type of business entity that combines benefits of a partnership and a C-corporation. In an S-corporation, the shareholder's Social Security information is used for tax purposes instead of an employer identification number. This eliminates the need for the business and the shareholder to both pay taxes. An S-corporation may transfer, gift or sell stock to a new owner or into a trust to preserve the organization after one of the original owners leaves, retires or dies.
Hire an attorney to create a stock transfer agreement. The stock transfer agreement states whom the stock is moving from and to what new entity or person the stock is moving to. This is a highly complicated document that requires proper business disclosures, separating person and business assets and indicating the person(s) responsible for any future liabilities to the company.
Receive any payment for the transfer (if any) and release all business assets to the new owner according to the terms of the contract.
Contact the Secretary of State in the state of incorporation and notify them of the transfer. Request any paperwork required to document the new stock owner and include a copy of the stock transfer agreement.
Notify the Internal Revenue Service (IRS) regarding the change. You will need to file a Form 2553 to establish the status change in ownership.