Close Corporation


A close corporation  is a corporation which does not exceed a statutorily defined number of shareholders and is not a public corporation. This number depends on the state's business laws, but the number is usually 35 shareholders.   

Benefits of a Close Corporation

The main benefit of a close corporation is that it will be exempt from a number of the formal rules which usually govern corporations. 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).

A close corporation is also commonly referred to as a closely held corporation.  


A close corporation allows the shareholders to act as would a general partnership in day-to-day operations, however IF the shareholders step in to run the company, they retain limited liability as shareholders, but take on the fiduciary duties of directors. As such, these shareholders may be liable for failing to fulfill their fiduciary duties. 

Further Reading

For more on close corporations, see this Florida Bar Association article, this St. John's Law Review article, and this University of Minnesota Law School Research Guide


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