The Close Corporation a Corporation with fewer formalities.
A Close Corporation (sometimes "Statutory Close Corporation") is a Corporation variant with a limited number of shareholders, restrictions on share transfer, and simplified governance (often no required board of directors). Available in about 15 US states. Mostly superseded by LLCs but still useful for specific situations.
A Close Corporation is a Corporation organized under a state's "close corporation statute" with statutory restrictions: a limited number of shareholders (typically 30 or 50 maximum), restrictions on share transfers, and simplified internal governance (often no board of directors required). The "closely-held" corporation in IRS parlance is different and broader.
How it actually works.
The Close Corporation was created in the mid-20th century to give small Corporations a way to operate without all the formalities of large Corporations. Pre-LLC era, this was a meaningful innovation. After LLCs were created in the late 20th century, most small businesses that would have formed Close Corporations instead form LLCs, which offer similar benefits with more tax flexibility.
Close Corporations still make sense in narrow situations: family businesses with established Corporation structure, businesses that need Corporation tax treatment (C-Corp or S-Corp) but want fewer formalities than a regular Corporation, and some states where Close Corp statutes offer specific benefits.
About 15 states have Close Corporation statutes: Delaware, Texas, California, Arizona, Kansas, Maryland, Missouri, Montana, Nevada, Pennsylvania, South Carolina, Vermont, Wisconsin, and a few others. The specific rules vary significantly by state.
What to know at a glance.
Common situations.
Side-by-side with related structures.
Common questions.
Which states have Close Corporation statutes?
How many shareholders can a Close Corporation have?
Can a Close Corporation be publicly traded?
Why would I form a Close Corp instead of an LLC?
Can a Close Corporation elect S-Corp?
Does a Close Corp need a board of directors?
What governs a Close Corp internally?
Are Close Corporations dying out?
How much does a Close Corporation cost to form?
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