Closely Held Corporations

A close or closely held corporation is a corporation that has only a small number of stockholders with no public market for its stock.  A close corporation is characterized by the overlapping of management and ownership.  As such, different fiduciary duties may exist in a close corporation as opposed to those fiduciary duties found in publicly held corporations.

Whether a particular corporation is classified or characterized as a close or closely held corporation depends upon the particular statutory provisions of the applicable jurisdiction. In some jurisdictions, a corporation may qualify as a close corporation under common-law principles.  At common law, the attributes of a close corporation include the following:

(1)the shareholders are few in number, often two or three;
(2)all or most of the shareholders are active in the business, usually serving as directors or officers or as management; and
(3)there is no established market for the corporate stock.

Inside Closely Held Corporations