The definition of a close corporation is a shareholder-owned business that doesn’t trade or list its stock on the stock exchange. State law usually limits how many shareholders a close corporation can have. Some states allow for a statutory close corporation, i.e., allowing you to form a close corporation legal entity. Others don’t.
That’s not all that goes into the close corporation definition. Close corporations may have special rules to follow about other matters, like:
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Now that we have the close corporation meaning out of the way, let’s talk about the potential close corporation advantages. These include:
Here are some close corporation disadvantages to keep in mind:
Just because there are disadvantages doesn’t mean it’s a bad idea, though. Let’s talk about the considerations that go into forming a close corporation.
Close corporation benefits include more lenient reporting requirements. Further, the shareholders can manage the corporation, rather than a board of directors. Save money on taxes by electing that the government tax the close corporation as an S or C corporation.
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Want to know how else to refer to a close corporation? Thought so. Here are other names for a close corporation:
Close corporation examples include Hobby Lobby and Mars, Inc.
Forming a close corporation is a way for a small, close-knit group of shareholders to own and operate a business. By organizing your small business as a close corporation, you may save money on taxes and simplify your business processes.
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Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.