How to Change a Small-Business Shareholder

by Jill Stimson

Small-business shareholders are subject to the U.S. Securities and Exchange Commission's public filing and disclosure exemptions if they generate less than $25 million in annual profits and were not required to register their securities with the federal government. The SEC allows small-business owners to transfer ownership to other shareholders without reporting their transactions if they only sold their securities in-state. Most small corporations are S corporations and must also comply with the Internal Revenue Service's tax guidelines in reporting their transfers of ownership on their tax returns. To change your small-business shareholder arrangement, you can enter into a buyout agreement.

1. Engage a corporate-law or business-law attorney. You can use your company's in-house counsel or find one by contacting your state's bar association for a referral.

2. Draft a buyout agreement for the new shareholder with your attorney. Include the specific buyout arrangement, including who will be responsible for any unresolved past debts and corporate taxes. If you are an S corporation, you most likely are responsible for paying your own shareholder dividends and will not pay corporate taxes.

3. Complete state ownership transfer documents if required. Although state laws vary, most states require you to complete state tax transfer of ownership documents. You may also have to complete other documents with your Secretary of State's office.

4. Publish your transfer of ownership if required by your state's law. Some states require shareholders to publicly disclose their ownership changes by publishing their sales in newspapers of general circulation for a few weeks. This provides notice to public citizens of your intent to absolve yourself of further business debts and liabilities.


  • The U.S. Small Business Administration has several helpful resources available through its website to help you transfer your corporate ownership. The IRS has additional resources specifically catered to help smaller businesses understand their tax responsibilities. You can also visit the SEC's small-business owner website devoted to helping small companies understand their corporate responsibilities.


  • If you enter into a gradual arrangement to transfer ownership, you may be liable for additional debts until the date of your final transaction or sale.

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