Share Transfer Form

Share transfer or transfer or shares refers to the handing over of share ownership from one individual to another.

Transferring shares is not as straightforward a process as it seems. Sure, some people may do it through word of mouth but it could lead to loads and loads of errors. Instead, using a share transfer form would be a better idea to steer clear of problems down the line. Shares can be transferred by gift or sale. No matter which option you choose, ensure that there is a share transfer agreement in place to avoid confusions

Stock transfers from one person to another are quite straightforward. In most cases, companies tend to offer a link containing instructions regarding stock transfers. Some even direct people to reputable stock transfer agents assigned to handle the company’s stock transfers. Contrary to popular belief, recipients do not have to worry about tax implications upon the transfer of shares. However, some have to face gift taxes in case the stock transfer’s value surpasses a particular amount.

When an individual buys a stock, they receive something referred to as a stock certificate. It is a legal document that proves that you own the shares of a company. In case the shareowner intends to transfer his or her shares to another person, they will have to resort to a stock transfer with the help of a share transfer form. Obtaining the form is quite easy, as all you need to do is visit the stock registry agent’s website or getting in touch with the agent.

Are you new to share transfer forms and wondering what purpose they serve and why they are so important? If yes, continue reading this piece, as it discusses essential details about a share transfer agreement.

What is Transfer of Shares?

Share transfer or transfer or shares refers to the handing over of share ownership from one individual to another. Share transfer is impacted by removing the existing shareholder’s name from the members register and adding the transferee’s name instead. A public company’s shares are free to transfer, whereas you may notice some restriction when it comes to a private company’s shares.

In transfer of shares, one must duly fill the transfer instrument, ensuring the transferee and transferor sign it. In addition, the transfer instrument’s form should match the Government’s requirements. Every transfer instrument should have the requisite stamps value.

Share transfer often comes in handy when someone decides to change their organization’s entire structure. They can do this by making changes to the current division of shares among shareholders or by introducing new shareholders. The transfer of shares is a procedure for transferring current shares by gifting or selling them.

When an individual receives or buys stock from a company, they receive a certificate which contains ownership related details, also called “the stock certificate”. Therefore, as mentioned earlier, whenever this individual plans to transfer shares, they will need to use a share transfer form to transfer shares.

Share Transfer Form

Also referred to as a share transfer instrument, a share transfer form is a regular document required for the share transfer process in an organization. This document comes in handy when a company or its shareholder wants to gift or sell the shares they bought from a company to another company or individual.

This document is quite straightforward, as it highlights specific points of the selling party, the receiver’s particulars, each share’s cost, and the amount of shares transferred. According to the law, private companies don’t have the right to transfer shares directly. On the other hand, existing shareholders can transfer them. The transferee and transferor will put pen to paper after filling the form.

After this, the organization can stamp its seal and move forward. However, the signature of two directors and a secretary could also be enough. These steps are quite important as they seal the transaction, and play a vital role in confirming the company’s share transfer process. Companies can store this document in their record once this process is over.

What is a Stock Transfer Form?

Whenever an individual or company invests or sells in another company or person’s share, utilizing a share transfer form becomes necessary. For instance, if two people divide a business’ shares equally, but one of them decides to depart the company, this agreement can come in handy for transferring the shares to the partner.

In case someone is buying all of the business’ shares, then using a stock transfer form or business agreement becomes a must. Here is a list of things discussed in most stock transfer forms these days:

  • Share type
  • The laws governing the agreement
  • The worth of the shares
  • Total number of shares
  • The seller and purchaser of the shares

A share transfer form also details the following payment information:

  • The agreement’s deadline
  • The total payment’s due date
  • Requirements about the deposit

There are essentially two share classes and forms used for gauging shares, they are: non-voting and voting. You will get the following advantages with voting shares:

  • You will have your say when it comes to choosing the board of director
  • You can cast your vote on various policies, especially corporate policy

On the other hand, there are no benefits associated with nonvoting shares. As you would expect, there are two parties present in share purchase agreements (the seller and the buyer). Both of them have to sign the agreement, and while there is no witness required for the signatures, having one would be a wise idea, in case, you suspect that one of the parties intends to deny authorization.

It would also help if you opted for notarization in situations like these, to make sure there aren’t any questions raised regarding the agreement’s validity. There are several documents utilized when it comes to the matters of stock transfer forms – here are some of the main ones:

  • W-9
  • LLC certificate form
  • Transfer cost basis form
  • Warrant exercise letter
  • Standard legend
  • Sole proprietorship form
  • Corporate resolution
  • Shell verification form
  • Stock power
  • Form for DWAC request (for stockholder)

Transfer of Shares

If you are new to share transfer form, it is worth keeping in mind that limited companies need to have one shareholder minimum. That said, it is indeed possible to buy a company’s shares and enjoy a portion of their profits. If you plan to buy equity shares, you can get them from to specific categories: ordinary shares and preference shares. Each type offers something different, and we will discuss both down below.

Ordinary Shares

Also referred to as common stock, ordinary shares offer shareholders the chance to vote during meetings, along with acquiring dividends from the organization’s profits. The voting rights in ordinary shares mean that your opinion will be valuable on issues like the business’ future direction or the distribution of salaries.

While you have rights to the dividends, organizations don’t have the obligation for distributing them in case they decide otherwise. This often happens when the profits are not according to the expectations, and in most cases, the companies reinvest those profits to get better returns next time.

Preference Shares

Preference shares are quite different from ordinary shares; with one of the main reasons being that they don’t have voting rights. However, they do offer some advantages when it comes to obtaining dividends. First off, preference shareholders get dividend payments before others. It does not matter whether the business is operational or in line for future liquidation, people holding these shares are always first in line.

In addition the dividend payments for people who hold these shares often take place at pre-determined periods throughout the year. It is a big reason why people look at preference shares as an investment with lesser risks, although the payments could be lower because of this.

Taxes for Stock Transfers

The tax you will need to pay will depend on the amount of time you kept the asset prior to selling it. This is why stock transfer taxation can be divided in two parts: long term capital gains and short term capital gains. Let us discuss how both of them work:

  • Long Term Capital Gains – After the Tax Cuts and Jobs Act passed, the long term capital gains tax treatment underwent a massive change. Before two years ago, long term capital gain’s tax brackets were in line with income tax brackets. The tax cuts and jobs act made unique tax brackets later on, and the numbers usually change every year. Long term capital gain taxation has some exceptions, in which the taxation rates could be higher than 20 percent. Otherwise, the regular thresholds are 0, 15, and 20 percent.
  • Short Term Capital Gains – The taxation for short term capital gains is quite similar to the taxation for ordinary income. The income you get from your investments, that you held for any time less than a year, should be included in that year’s taxable income. For instance, if you possess $80,000 in taxable income from the salary you get and $10,000 from your short-term investments, the total taxable income will be $90,000.

Tax Exemptions for Small Business Stocks (Section 1202)

The small business stock gains inclusion, also known as section 1202 is a vital part of the IRC (Internal Revenue Code). The main aim of section 1202 is to provide capital gains exempt from federal taxes. This Section is only applicable for QSBS qualified small business stocks. Section 1202 can be quite beneficial for small businesses as it can be entirely, and in some cases, partly tax exempt.

This type of tax exemption can be a great advantage for shareholders of small businesses, and serve as a lifeline if you plan to invest in small businesses over the long term.

Share Transfer Agreement Sample

As mentioned earlier, while every company’s share transfer form may be different, its essence remains the same. So, if you want to create a sample share transfer agreement, the main things to include would be the details of the transferor and transferee along with their signatures and the names of their respective companies.

Share Transfer Agreement Sample

When preparing your company’s share transfer form, make sure you keep all of your organization’s essential considerations in mind. As you would expect, every company, no matter how many similarities they share, tend to operate differently. So, ensure the share transfer agreement sample that you are using has the necessary details. If not, you can always make tweaks and changes according to your preferences.

Recording your Share Transfer Forms on Eqvista

With the importance of processing share transfer forms on all transfers in your company, its also important to record these for both the company, and also transferor/transferer for their recordkeeping and tax purposes. Here is where Eqvista comes into play.

Our equity management system can help you record and share all the details of your share transfers to other parties, all in real-time.

Here on the Eqvista platform is how the record of share transfers would look like.

record of share transfers

Here you can see that three share transfers occurred. Now let’s say you want to upload the share transfer forms and share them with the new and previous shareholders, you can do that on Eqvista.

From the Document section, simply upload the documents and enter in the parties name to share access to the documents.

upload the documents

You can also easily edit, delete, or download the documents for later use.

Interested to Use Share Transfer Forms?

A share transfer form is a great tool for facilitating the transfer of shares without any dispute and quarrels. If you plan to transfer or obtain shares, the information discussed in this piece will provide you a complete lowdown about how the process works, how this form can save you from loads of troubles, and how to accurately record this for transferring shares.

Eqvista is advanced Cap Table software that can help record and organize the equity in your company. Our platform can handle all your share issuances, transfer of shares, stock options, warrants, convertible notes, and documentation involved. Share the details with all of your shareholders in real time all from one place. Read about our entire list of support articles here.

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