How to Change Ownership of a Corporation in California

To change ownership of a corporation in California, you transfer shares of stock, and the transfer only holds up if you do five things in order: clear any restrictions in the corporation’s governing documents, fit the sale within a state and federal securities exemption, document the transfer and update the corporation’s internal records, file an updated Statement of Information with the Secretary of State if officers or directors change, and handle the property tax, IRS, and capital gains filings that the sale can trigger. Miss a step and you can end up with a void transfer, a 10 percent property tax penalty, a suspended corporation, or a rescission claim from the buyer.

Start With the Corporation’s Transfer Restrictions

Before shares change hands, read the articles of incorporation, the bylaws, and any shareholder agreement. California corporations commonly impose restrictions such as a right of first refusal that forces the seller to offer shares to existing shareholders first, a buy-sell formula that fixes the price, or a flat prohibition on transfers without board approval.

These restrictions are enforceable against a buyer as long as they appear on the stock certificate or on the initial transaction statement for uncertificated shares. If the restriction is not noted there, it only binds a buyer who actually knew about it.¹ Ignoring a valid restriction can void the entire transfer.

Close corporations carry one more rule. If the articles cap shareholders at 35 or fewer, any transfer that pushes past that cap is automatically void, and every certificate must carry a conspicuous legend saying so.¹

Fit the Sale Within a Securities Exemption

Shares of stock are securities. Selling them without registration is illegal under both California and federal law unless you qualify for an exemption. Most private ownership changes do qualify, but only if you meet the exemption’s conditions.

California Corporations Code Section 25102(f)

The state exemption most private sales rely on has four conditions, all of which must be met:

No more than 35 purchasers total, counting buyers outside California.
Every purchaser either has a preexisting personal or business relationship with the seller or its officers and directors, or is financially sophisticated enough to evaluate the investment.
Each purchaser represents they are buying for their own account, not for resale.
No public advertising of the sale.

The issuer must also file a notice with the California Department of Financial Protection and Innovation. A missed notice does not destroy the exemption, but the corporation must file it and pay the equivalent qualification fee within 15 business days of discovering the oversight or receiving a demand from the Commissioner.²

SEC Rule 506(b)

Federally, most private stock transfers use SEC Rule 506(b) under Regulation D. It allows sales to an unlimited number of accredited investors and up to 35 non-accredited investors, with no general solicitation or advertising. If any non-accredited investors participate, the corporation must give them disclosure documents comparable to a public offering. Form D is due to the SEC within 15 days of the first sale.³

Shares sold under these exemptions are restricted, meaning the buyer cannot freely resell without their own exemption or registration.

Document the Transfer and Update Internal Records

Once the transfer clears the governing documents and fits an exemption, the transfer itself runs on three pieces of internal paperwork.

Stock Purchase Agreement

This is the contract between buyer and seller. It should set the number of shares, the price, any vesting terms, representations and warranties, and dispute resolution. For a full change of control, the agreement typically also covers the management transition, indemnification for pre-closing liabilities, and closing conditions.

Board Approval

When the corporation is issuing new shares rather than transferring existing ones, the board of directors must approve the issuance and set the consideration. California law requires the board to determine by resolution the value of any non-cash consideration. Valid consideration includes money, services already performed, debts cancelled, and property received; promissory notes and future services generally do not count.⁴

For a transfer of existing shares from a shareholder to a buyer, the board does not technically issue the shares, but board approval is standard practice and often required by the bylaws or a shareholder agreement. Document the approval in meeting minutes or a written consent, naming the parties, share count, and effective date.

Stock Ledger and Certificates

Update the stock ledger the day the transfer closes. Record the new shareholder’s name, address, share count, and transfer date. Cancel the old certificate and issue a new one to the buyer. Every certificate must be signed by at least two corporate officers.⁵

Uncertificated shares are allowed if the corporation adopts an electronic issuance and transfer system that is approved by the SEC, authorized by federal statute, or complies with Division 8 of California’s Commercial Code. Outstanding paper certificates must be surrendered before the electronic system takes effect for those shares.⁵

File an Updated Statement of Information If Officers or Directors Change

California does not require you to report a stock transfer itself. There is no state form for recording that shares moved. But if the ownership change brings in new officers or directors, you need to file an updated Statement of Information (Form SI-550) with the Secretary of State.

Every California stock corporation files an SI-550 within 90 days of incorporating and annually thereafter during a six-month window tied to the incorporation date. Between those periods, you can file an updated statement to report changes at no charge.⁶

Three ways to submit:

Online through bizfile at bizfileonline.sos.ca.gov, which returns electronic confirmation immediately.⁷
By mail to the California Secretary of State, Business Programs Division, P.O. Box 944230, Sacramento, CA 94244-2300.
In person at the Sacramento office, where a counter handling fee may apply.

As of early 2026, mail and in-person Statements of Information were being processed within about one to five business days of receipt.⁸ For mail or in-person filings with a fee of $25 or more, the Secretary of State returns one uncertified copy for free.⁹ Certified copies cost $5 per document plus $1 for the first page and $0.50 for each additional page.¹⁰

Handle Property Tax Reassessment If the Corporation Owns Real Estate

This is the filing most owners miss, and the penalty is real. If the corporation owns California real property and the transfer gives someone direct or indirect control of more than 50 percent of the voting stock, that triggers a “change in control” under Revenue and Taxation Code Section 64, and the property is reassessed to current market value.¹¹ For property held for years at a low assessed value, the jump can be dramatic.

The acquiring person or entity must file a BOE-100-B (Statement of Change in Control and Ownership of Legal Entities) with the Board of Equalization within 90 days of the change in control. A separate filing is required when cumulative transfers among the original co-owners exceed 50 percent of total ownership interests. The penalty for missing the 90-day deadline is 10 percent of the taxes on the newly reassessed value.¹²

If the corporation does not own California real property, this filing does not apply.

Notify the IRS of a New Responsible Party

If the ownership change produces a new “responsible party” for the corporation, federal regulations require you to report it to the IRS within 60 days on Form 8822-B. The responsible party is the individual with authority to control or manage the corporation’s funds and assets, so a change in the majority shareholder typically triggers this.¹³

Domestic corporations are not required to file beneficial ownership information reports with FinCEN. A March 2025 interim final rule exempted all entities created in the United States from that reporting requirement.¹⁴

Plan for the Tax Bill on the Sale

The seller owes tax on the gain, and California and the IRS take separate bites.

Federal Capital Gains

Shares held for more than a year are taxed at long-term capital gains rates of 0, 15, or 20 percent, depending on taxable income. For 2026, the 20 percent rate starts at $545,501 for single filers and $613,701 for married couples filing jointly. High-income sellers may also owe the 3.8 percent net investment income tax.

California Capital Gains

California has no preferential rate for capital gains. Gains are taxed as ordinary income at the seller’s marginal state rate, which can reach 13.3 percent.¹⁵ A high-income seller can face an effective combined rate above 37 percent.

Stock Sale or Asset Sale

Buyers and sellers often disagree on structure. In a stock sale, the buyer takes the corporation as-is, liabilities and all. In an asset sale, the buyer picks specific assets and the purchase price is allocated across asset classes, with both sides filing IRS Form 8594; Form 8594 does not apply to stock purchases.¹⁶ Buyers typically prefer asset deals for the step-up in tax basis; sellers typically prefer stock deals for simpler capital gains treatment.

What Skipping Steps Costs You

Missing the Statement of Information: the Franchise Tax Board can assess penalties and ultimately suspend or forfeit the corporation’s rights and privileges. A suspended corporation cannot legally conduct business, file suit, or defend itself in court.¹⁷
Missing the BOE-100-B: a 10 percent penalty on property taxes attributable to the reassessed value.¹²
Blowing the securities exemption: the sale can be rescinded, the buyer can demand their money back, and the seller and corporation may face enforcement by the California Department of Financial Protection and Innovation or the SEC.
Failing to update the stock ledger: disputes over who actually owns the shares, sometimes resolved only by a court.
Missing the IRS 60-day deadline: penalties for failing to report the responsible party change, plus confusion over who is accountable for the corporation’s tax obligations.¹³

Reviving a suspended corporation means clearing the delinquent filings, paying back taxes and penalties to the Franchise Tax Board, and often paying reinstatement fees to the Secretary of State. Months of delay and thousands of dollars in professional fees are common. Getting the sequence right the first time is far cheaper than fixing it later.

1
California Legislative Information. California Corporations Code Section 418
2
California Legislative Information. California Corporations Code Section 25102
3
U.S. Securities and Exchange Commission. Filing a Form D Notice
4
California Legislative Information. California Corporations Code Section 409
5
California Legislative Information. California Corporations Code Section 416
6
California Secretary of State. Instructions for Completing the Statement of Information Form SI-550
7
California Secretary of State. bizfile Online
8
California Secretary of State. Current Processing Dates
9
California Secretary of State. Business Entities Fee Schedule
10
Legal Information Institute. California Code of Regulations Title 2 Section 21903.5 – Copy Fees
11
California Legislative Information. California Revenue and Taxation Code Section 64
12
State of California Board of Equalization. Statement of Change in Control and Ownership of Legal Entities, BOE-100-B
13
Internal Revenue Service. Form 8822-B, Change of Address or Responsible Party – Business
14
Financial Crimes Enforcement Network. Beneficial Ownership Information Reporting
15
Franchise Tax Board. Capital Gains and Losses
16
Internal Revenue Service. Instructions for Form 8594, Asset Acquisition Statement Under Section 1060
17
California Secretary of State. Statements of Information Filing Tips