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Closed Corporation
(redirected from Closely Held Corporations)

   Also found in: Dictionary/thesaurus, Legal 0.01 sec.
Closed corporation
A corporation whose shares are owned by just a few people, having no public market.

Closed Corporation
A company in which a small group of shareholders controls the majority of the shares. These majority shareholders tend to hold on to the company's stock, and, for that reason, only minority shares are traded, leading to light trade volume. Closed corporations are, by their nature, resistant to hostile takeovers and proxy wars. They tend to be more stable than other companies because their share prices are not determined by (sometimes irrational) investment decisions, but by the value of the company itself. However, closed corporations do not have access to as much working capital as corporations with more shareholders. They are also called closely held companies.

closed corporation


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Management Structure of Typical Closely Held Corporations Shareholders = Directors = Officers The result is that many statutory requirements of corporations--such as annual meetings of shareholders, elections of directors and appointment of officers--are simply formalities.
In contrast, the IRS has consistently used [section] 162(a)(1) to limit corporate deductions for executive compensation paid by closely held corporations, since closely held corporations lack the commercial checks and balances of their publicly traded brethren.
From the planning standpoint of a closely held corporation, the goal should probably be to reduce to the extent possible the administrative burden; many closely held corporations have limited administrative and clerical personnel.
 
 
 
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