Recapitalizations

April 13, 2006

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Recapitalization, or the issuance of two classes of corporate stock, is another method used to transfer ownership at minimal tax cost. Stock is generally divided into voting and non-voting categories which permits control to remain with one individual or group, usually the family members who are active in the business. The non-voting stock is used to give provide equity to the inactive family members. There are stringent laws limiting recapitalizations and, again, expert legal advice is necessary.