USA Minority Owner Buyout

[DEW]

Hi

The company I work for has 3 owners. One owns 90%, one owns 9% and the third owns 1%. The company is a c-corp. The 9% owner is being bought out by the 90% owner.

I’ve never gone through this before so I want to get the entries right. Can you please help me with this

thank you.

 

[BIG E]

It depends upon how the transaction is structured.

If the 90% owner directly purchases the 9% owner's stock - then there's no accounting entry on the corporation's books. The purchase of the 9% interest is then an increase in the outside basis of the currently 90% owner.
If the 9% owner tenders his shares to the corporation, and then the 90% owner purchases the 9% shares from the corporation, then you need to record an entry for Treasury Stock shares to the corporation upon payment to the 9% owner, then book a separate entry of receipt for the stock issued to the 90% owner, considering FMV of stock as well as Additional Paid in Capital if there is any.