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What Is a Closed Corporation?
Last updated Wednesday, May 22, 2024
A closed corporation is a type of corporation
that is privately held by a limited number of shareholders, usually family
members or a small group of investors. In the case of a closed corporation, all
parties intend to remain a small, tight-knit group. Close corporations cannot
have more than 30 shareholders. A closed corporation offers the same legal
advantages as a corporation, such as limited liability, but also has greater
flexibility in administration than a publicly traded corporation.
Closed corporations cannot be mining or oil
companies, stock exchanges, banks, insurance companies, public utilities,
educational institutions, or corporations declared to be vested with public
interest.
A Close
Corporation is similar to a private company. It is a legal entity with its own
legal personality and perpetual succession and must register as a taxpayer in
its own right. A Close Corporation has no share capital and therefore no
shareholders. The owners of a Close Corporation are the members of the Close
Corporation.
In Close
Corporations shareholders are actively involved in managing and operating the
corporate business. Shareholders have a written Shareholder's Agreement
defining how management decisions are made and what restrictions apply to stock
sale. A close corporation can generally be run directly by the shareholders
(without a formal board of directors and without a formal annual meeting), and
is exempt from a number of the formal rules which usually govern corporations.
A close corporation is also commonly referred to as a closely held corporation.
By
structuring as a closed corporation when incorporating, a partnership can
benefit from liability protection without dramatically changing the way that
the business operates. It can also offer companies greater flexibility in
operations, as they are free from most reporting requirements and shareholder
pressure.
When forming a closed corporation, the
Articles of Incorporation for a corporation must contain a clause electing that
the business be registered as a closed corporation. In general, a closed
corporation is exempt from many requirements of corporations, including holding
annual meetings or having a board of directors. Closed corporations are not
required to publish financial statements or disclose their financial outlook to
anyone other than close shareholders. This can potentially protect sensitive
business plans. A closed corporation cannot have outside investors. By
definition, closed corporations are closed to investment from the general
public.
Nevada
Commercial Registered Agent
Entity # E0502742015-6
NV Business ID NV20151637034
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