Business, Legal & Accounting Glossary
A corporation owned and operated by a few individuals, often members of the same family, rather than by public shareholders. US State laws permit 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 vote of the shareholders.
n. a corporation which is permitted by state law to operate more informally than most corporations (allowing decisions without meetings of the board of directors) and has only a limited number of shareholders. Usually a close corporation’s shareholders are involved in the actual operation of the business and often are family members.
A close corporation is a corporation that possesses the following traits: a small number of shareholders; no ready market for the corporation’s stock; and substantial participation by the majority shareholders in the management of the corporation. Some states have close corporation statutes. This kind of corporation typically has 30 to 50 stockholders and is a good match for businesses in which the majority of stockholders is actively involved in the management of the company.
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This glossary post was last updated: 27th April, 2020 | 3 Views.