Closely Held Corporation

A closely held corporation, often referred to as a “close corporation,” is a form of business organization characterized by a limited number of shareholders who manage and own a corporation. All close corporations are privately owned entities (i.e., not publicly traded) that are owned by a limited number of shareholders, but the exact criteria of what constitutes a close corporation vary by state and are also defined by the U.S. Internal Revenue Service (IRS). This entry addresses the historical development of close corporations, various criteria and definitions of close corporations, and the governance of close corporations.

Historical Development of the Close Corporation

The term close corporation is rooted in English local government law. Prior to 1835, when the Municipal Corporations Bill abolished close corporations in England, ...

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