How to add a partner in a C Corporation?
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How to add a partner in a C Corporation?
I am a NY resident but I have been a 100% shareholder of my C Corporation which was incorporated in DE 10 years ago. However, the business was dormant for a few years, then started to be active last year but hasn’t been making profits yet. I’m interested to add a friend of mine as a partner in my business to help me
in the growth of the business with marketing and clients’ acquisition. I would like to know what are the best options and legal steps to do so? What type of agreement should be created? Do I need a partnership agreement? Should I use my residence address or the corporation address in the agreement? If I need a partnership agreement, do I have to sell my shares to this partner? Do I have to amend my certificate of incorporation? I already contributed several amounts to my corporation and business expenses through those years. Also, I will be owning the corporation at 75% and my partner 25%.
Asked on September 27, 2018 under Business Law, Delaware
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 6 years ago | Contributor
Corporations don't have partnership agreements. Ownership in a corporation is determined purely by stock ownership: he will have as much ownership (whatever % of the company) as the percentage of stock you sell or give him. You can sell him the stock (i.e. he pays you for it); you can give it outright to him; you can have him earn it over time by performing work (if you go this route, you first sell back some of your stock to the company, then have the corporation (so in its name, using its address, etc.) execute a written agreement with him detailing what he needs to do to earn the stock, and when and under what conditions he gets it). It's all about the stock ownership with a corporation. Any business formation attorney can easily help you effectuate any of these transactions the way you want to, and advise you as to which makes the most sense fro you and your friend.
For your tax related questio (busines expeness), consult with an accountant or tax preparer to understand how *your* takes specifically are affected.
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