Corporate Resource Guide » close corporation http://www.corporateresourceguide.com A Unique Resource for Small Business Corporation Owners and Operators Tue, 26 Jan 2010 02:35:42 +0000 en hourly 1 http://wordpress.org/?v=3.0 What is the difference between a “close corporation” and a “closely held corporation?” http://www.corporateresourceguide.com/what-is-the-difference-between-a-%e2%80%9cclose-corporation%e2%80%9d-and-a-%e2%80%9cclosely-held-corporation%e2%80%9d/ http://www.corporateresourceguide.com/what-is-the-difference-between-a-%e2%80%9cclose-corporation%e2%80%9d-and-a-%e2%80%9cclosely-held-corporation%e2%80%9d/#comments Tue, 24 Nov 2009 02:43:12 +0000 Robert Montgomery http://www.corporateresourceguide.com/?p=21 Continue reading →]]> A “closely held corporation” is a general term used to describe a smaller privately held corporation with few shareholders, usually family members or close associates.

On the other hand, some states have adopted special statutes for a “close corporation” which describes a corporation with a small number of shareholders that is authorized to function without directors. This bypasses some of the normal corporate formalities involved with a board of directors and supposedly simplifies the process.

My experience is that in some cases this may make operation of a small corporation easier but on the other hand, it sometimes complicates it because the business world is accustomed to dealing with directors.

For this reason, owners or shareholders of a “close corporation” may find themselves trying to explain to a banker or other business person why they don’t have directors and why they don’t need director approval for various corporate actions. As a practical matter, the “close corporation“ structure may not provide that much benefit after all.

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