How to Make Someone a Shareholder

An incorporated company must have shareholders.

Shareholders are owners of stock issued by a corporation, who have certain rights, such as dividend payments and voting for board members. Their rights depend on the shareholder agreement and the type of stock the shareholder owns. The value of stock in a company depends on the financial health of the corporation and can change from day to day. A corporation or another shareholder can make a person a shareholder in a company by selling, gifting or bequeathing shares in a corporation.

Instructions

1. Start a new corporation and grant shares to a person who invests in a company as a shareholder when a new corporation is formed. Issue a stock certificate for shares equal to the value of the capital contribution or in kind services provided by the shareholder.

2. Purchase a share of stock from a corporation in the name of the person you want to make a shareholder. Purchase stocks for another person directly from small corporations. Hire a broker to purchase stocks from large publicly held corporations.

3. Transfer shares that you already own through your corporation's share transfer requirements. Contact your corporation for information about the required documents to transfer your shares. Deliver the transferred stock certificates to the transferee.

4. Bequeath your shares of stock to another person in your will. Add the gift by writing a new will or adding a codicil to an existing will. Transfer of ownership will be completed after the will is probated.

Tips & Warnings

• Consult a tax attorney prior to gifting, selling or transferring shares to determine your tax liability or any tax credits you might be entitled to claim.

• Publicly traded corporations and shareholders must follow strict trading laws and regulations. Always consult an attorney or broker before transferring, gifting or selling stock to another person.

• Some corporate stocks may not be transferable or can only be sold under certain conditions and restrictions. Consult an attorney before attempting transfer of restricted shares.

References

• Citizen Media Law Project; Forming a Corporation; 2008
• US Legal: Shareholders
• American Century Investments: Transfer of Share Ownership
• PPL: Stock Transfer Instructions

Resources

• Mississippi Lawyers Domain: Forms of Business Ownership
• Investor Glossary: Shareholder