I just got off a phone call with one of our DKAffiliated CPAs, Frederick Schubert. We were discussing one of his new clients and he brought up a great point that I don’t emphasize enough. This is a mistake that we both see, again and again, when people try to “do it yourself” with a corporation.
In order to have a legitimate corporation that stands up to potential legal scrutiny, you must show a value for the shares that distributed. And that only makes sense. If you’re buying a corporation, don’t you have to give something of value – typically your time or money? So, when you’re starting your own corporation, make sure you record what that value in the stock is. Otherwise, your corporation is not considered properly funded…and that might mean that a court rules you don’t really have a corporation.