How Is a Corporation Passed to Heirs?

By Louis Kroeck

Although the actual process of transferring a corporation to your heirs may be relatively easy, choosing a method of transfer and evaluating the ramifications can be difficult. Before you begin, you should meet with your heirs and your accountant to explore your options for transferring your corporation.

Management Roles

Although you may wish to leave your corporation to all of your heirs, it is important to consider management roles prior to transfer to avoid power struggles. Some of your heirs may decide that they do not want to take part in managing the company. Consider giving managing heirs the opportunity to purchase stock in the corporation from non-managing heirs when you pass the corporation. Alternatively, consider giving non-managing heirs a cash inheritance rather than a stake in the corporation.


Before transferring your corporation, you should know it's precise value. You'll need to perform a thorough valuation of your corporation. This step is often overlooked when transferring a corporation to heirs. The exact value of your corporation prior to transfer is important for tax purposes and for accountability purposes.

Ready to incorporate your business? Get Started Now


There are three major methods that most individuals use when transferring a corporation: A corporation may be transferred as a gift prior to death, through a sale, or through a trust or will. The size of your corporation and the amount of income it generates will create different considerations concerning its transfer. You should meet with an estate planning attorney or an accountant who works in corporate governance prior to passing the corporation to determine what method of transfer will be most beneficial.

Method of Transfer

If you decide to pass your corporation to your heirs as a gift or through your will, you could incur substantial gift taxes or estate taxes. If your corporation is relatively small in size, you may be able to gift it to your heirs in increments and subsequently avoid having to pay gift tax. As of 2011, you may transfer up to $13,000 in gifts in one year without having to pay gift tax. Depending on the type of stock issued by your corporation, you may also consider transferring your corporation through a revocable trust, an irrevocable trust or a charitable remainder trust. The considerations for transfer will vary greatly depending on your circumstances.

After the Transfer

Following the transfer of the corporation, it is important to update any legal and financial documents related to the corporation. You may also need to contact your attorney to have your articles of incorporation updated to reflect the change in ownership. Finally, you may consider purchasing a "key man" insurance policy for the new managers; this type of policy works by paying the business for losses that can result from the death or disability of the person specified in the policy.

Ready to incorporate your business? Get Started Now
How to Change Ownership in an S Corporation



Related articles

How to Liquidate an S Corporation

In theory, your corporation could last forever, but in reality, many corporations eventually cease to exist. Part of dissolving your corporation involves liquidating corporate assets since the corporation can’t own assets when it is no longer in business. Although your corporate bylaws or state laws may spell out the liquidation and dissolution process, the methods used are generally similar between corporations.

How to Change a Corporation to an LLC

Corporations may wish to change their form of organization to the limited liability company, or LLC, form for a number of reasons, including to concentrate ownership in the hands of a smaller group and to take advantage of LLCs' unique tax options. However, changing a corporation to an LLC is not as simple as filling out a specific form. A corporation must be fully dissolved, a new LLC formed and all assets transferred to the new company for the transition to be complete.

How to Transfer an LLC Upon the Death of the Owner

If you are running a single-member limited liability company -- a one member LLC -- you may need to insert a provision in your existing operating agreement that will insure a smooth transfer of ownership to another person or organization after your death. If you die and there is no provision within your single-member LLC's operating agreement for the transfer of your ownership to someone else, your LLC can become an asset of your estate. As such, it may encounter tax and probate problems. Your LLC may be divided among family members, dissolved or sold off to people you did not choose, depending on the laws of the state in which your estate is probated.

LLCs, Corporations, Patents, Attorney Help

Related articles

Switching Ownership of the S Corp

An S corporation begins its life as a regular corporation. At some point after creation, the corporation makes a ...

How Can I Pass My Farm on to Heirs?

Whether inherited from your relatives or acquired during your lifetime, several factors may influence your decision ...

How to Record a Land Transfer to a Corporation

Since corporations are legal persons, they can hold title to real property in their own names just as individuals can. ...

How to Change From a Corporation to a Sole Proprietorship

As your company progresses, you may decide that you would be more successful with a different business structure. ...

Browse by category
Ready to Begin? GET STARTED