Legal question about owning an equity in a company

[LanaDan]

Hello everyone,

I own a small consulting company. Currently I have a few equity deals, where I get X ownership of the company in trade for providing consulting services.

It puzzles me but all of the initial research and everyone seems to suggest that for me to own equity all that needs to happen is:

on the company's end, when filing the incorporation or reworking share ownership, they list my company along with shares or percentage and I sign a piece of paper.
To me that's odd. It just feels too simple.

Is this correct? any information on this subject would be highly appreciated. Thank you in advance!

[gregfallon1]

You should also talk with your CPA about the different tax consequences: service for property(stock), services for profit interest, and read up on the 83(b) election.

[Freelancier]

In companies that have a very limited number of owners, yes, they just have to issue you shares and you'll both want an agreement documenting your your shares and explaining any limits on your ownership or ability to sell the shares, and that's pretty much it. It's when you get to a certain number of shareholders (I think it's 35) that you have to start telling the SEC about everything. Until then, it's too small for them to worry about and they assume you know what you're doing.

But you'll definitely want to get a good small business attorney and accountant to help you through the process to make sure you're protected in case they do something stupid like pierce the corporate liability shield.

[LanaDan]

In companies that have a very limited number of owners, yes, they just have to issue you shares and you'll both want an agreement documenting your your shares and explaining any limits on your ownership or ability to sell the shares, and that's pretty much it. It's when you get to a certain number of shareholders (I think it's 35) that you have to start telling the SEC about everything. Until then, it's too small for them to worry about and they assume you know what you're doing.

But you'll definitely want to get a good small business attorney and accountant to help you through the process to make sure you're protected in case they do something stupid like pierce the corporate liability shield.

Thank you a lot for your input. It really helped. I will definitely involve a good attorney before signing any documents.

[LanaDan]

You should also talk with your CPA about the different tax consequences: service for property(stock), services for profit interest, and read up on the 83(b) election.
Thank you for the advice. I will definitely discuss it with my accountant.