An easy way to transfer your real estate business out of an S-corp is to purchase a LLC, run it as separate business property, then have the new company be a shareholder in the old company’s stock. To remove property from a corporation, ownership/title must change. Removal is generally by sale or by distribution to shareholders.
So get ready to take charge of your real estate destiny – let’s dive in!
Methods of Transfer
- Sell the Property to a Third Party: One effective way to transfer real estate out of an S Corporation is by selling the property to a third party.
- Distribute the Property to the Shareholders: Another option is to distribute the real estate property to the shareholders of the S Corporation.
- Prepare a stock purchase agreement to formalize the buyout.
Accessing Money from an S Corp
Determine Partner’s Basis. Partners in an S corporation may loan money or equipment to the company from time to time. There are various ways to take money out of your S Corp such as payroll, expense reimbursement, shareholder distributions and loans.
Taking Distributions
Take A Distribution. Distributions are the best way to get money from your S Corp. Because S Corps are pass-through entities, you have to report your business’s income on your personal return whether you actually receive it as a distribution or not.
Creating a Transfer Agreement
Create a transfer agreement. A transfer agreement is one of the most important documents you will create as an owner of your business. This document states how, when, and/or by whom your company transfers or distributes its assets.
Liquidity and Net Worth
Calculate your liquid net worth. This is also known as net profit or net income. Net liquid wealth includes all liquid assets plus the yearly earnings from your business.