Reporting Founder Changes to the IRS


Last year, I incorporated with two other people who, at the time, were all about the project on which we were working. The project eventually fell flat due to loss of interest on their parts.

I've since come up with a new project and will be proceeding with it myself. The other founders know this. We've discussed things and all agreed that restructuring the current company without them as founders is best since both have other obligations now and are no longer interested in committing significant amounts of time to any kind of start-up.

I filed my yearly business report with the state and took them off as board members. I will be filing my taxes this year at a tax office since I have to deal with the the S-corp taxes as well. I will mention all of this to whomever I file my taxes with to get their advice, but I figured I'd run this by the people here as well.

When adding or removing founders, how do you deal with reporting the restructuring of the share distribution to the IRS?

Tax Founders Shares

asked Feb 4 '11 at 12:23
261 points

2 Answers


After speaking with a tax professional when doing the taxes for the S-corp and generating the Schedule Ks for the shareholders for the previous year, I was notified that all I needed to do was amend my Articles of Incorporation with the state and change the share distribution. No report to the IRS is necessary for such a change. Next year, I'll just generate a Schedule K for myself as part of having the taxes done for the corporation.

answered Feb 17 '11 at 10:49
261 points


I'd consider closing the business. Write off losses if any and incorporate under a new name. A: you can bring any debt if any to the new firm as a loan agreement if need be and
B: start with a fresh page for your new endeavor.

Please keep in mind this is not official tax dept advice just a strategy that could help, I would still run this by your tax acct.

answered Feb 4 '11 at 23:48
Xs Direct
275 points

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Tax Founders Shares