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Transferring Property Into a Corporation
Caution!
When setting up a corporation, make sure all property to be used in the corporation has been legally transferred into the corporate name before commencing operations.
Here's why:
Noncorporate property involved in a legal claim may not be covered by corporate liability insurance.
For example, say you contribute a piece of equipment to the corporation that you had previously used in your sole proprietorship. You fail to transfer the equipment into the corporation's name. Then, someone gets hurt using the equipment and sues the corporation.
Since the equipment was not legally owned by the corporation, it is possible for the insurance company to deny the claim.
Check with your insurance carrier.
Documents Used to Transfer Property:
Once the corporation is formed, property may be transferred into it in exchange for its stock.
There are a variety of documents used to legally transfer property from one person to another or to a corporation (an artificial person):
- Bill of Sale: This is used to transfer most
anything -
- Except
- Real estate
- Cars
- Leases
- Contract rights
- Except
- Title Transfer Documents: To transfer a vehicle
to a corporation follow the procedures prescribed by the state where
the vehicle is registered.
- You will normally have to fill out the back of the Certificate of Title, have it notarized, surrender it to the new owner (the corporation), then, a new Certificate of Title must be obtained in the corporate name.
- Assignments: You can use an Assignment
of Lease form to transfer ownership rights in a lease.
- Attach copies of contracts as exhibits to the Assignment.
- Deeds: Deeds are used to transfer rights in
real property (real estate).
- Check if your state requires an Affidavit of Property Value to be filed along with the deed. Your County Recorders office handles this.
Next:
C-corporations-Transferring Property Into A Corporation -Continued: Opening a Corporate Bank Account
Related Links
- Leasing and Licensing Property to a Corporation
- Opening a Corporate Bank Account
- Valuation of Property Transferred Into a Corporation
- Section 351(a)-Tax-Free Exchange
- Section 351(b)-Partially Taxable Exchange
- Section 1244 Losses on Small Business Stock
- Who May Claim an Ordinary Loss on Section 1244 Stock?
- Deduction Limit for Section 1244 Stock
- Sole Proprietorships
- Partnerships
- S-corporations
- Limited Liability Company
Copyright © 2008-2012 Larry Villano. All rights reserved.