Asked in Business Law

Q: Can a company buy shares from a new startup and be a board member

I am starting a new company and the co founders I talked to said they want their company to be the shareholder than individually. So can I sell shares to a company

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1 Lawyer Answer

A: Yes, a company can own shares in certain situations (notably, if you're filing taxes as an S-corp, only a limited number of humans can own shares). There are strict state and federal securities laws relating to selling shares in companies. That is to say, if you take a substantial amount of money from investors and lose it all, someone is getting sued. Issuing securities on a DIY basis is like drilling your own teeth to save on dental bills; it can be done, but it's a terrible idea.

Contact an attorney in your state who focuses on business transactions and formations to assist you in preparing the organizational documents and working through these issues.

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