Controlled Group

How to avoid controlled group of corporations issues

In order to avoid the controlled group problem, a business owner should avoid having control of different corporations with any small group of people. One way to do this is instead of 2 people owning 2 corporations for 2 different businesses. A business owner could set up a corporation for one person and a different corporation for another. Each corporation should have 51% of the stock owned by someone else unrelated to those people by blood or marriage. A buy-sell agreement would come in handy with this set up as well.

Two corporations controlled and owned by the same two people, John and Mary.

Instead of having two corporations as shown above owned by two same people, the business owners can have the following different set up for their corporations.

Two corporations with no controlled group where Jackie and David are not related to John and Mary.