A close corporation is a corporation that is exempt from a number of the formal rules usually governing corporations, because of the small number of shareholders it has. The specifics vary by state, but usually a close corporation must not be publicly traded, and must have fewer than a set number of shareholders (usually 35 or so). A close corporation can generally be run directly by the shareholders (without a formal board of directors and without a formal annual meeting).
Definition from Nolo’s Plain-English Law Dictionary
A corporation owned and operated by a few individuals, often members of the same family, rather than by public shareholders. Close corporations are regulated by state close corporation statutes, which usually limit the number of shareholders to 30 or 35 shareholders and require special language in the articles of corporation. In exchange for following these requirements, state law usually permits close corporations to function more informally than regular corporations. For example, shareholders can make decisions without holding meetings of the board of directors and can fill vacancies on the board without a formal vote of the shareholders. Compare: closely held corporation
Definition provided by Nolo’s Plain-English Law Dictionary.
August 19, 2010, 5:12 pm