What is a close corporation?
A close corporation (CC) is similar to a private company as it is a legal entity with its own legal personality, perpetual succession and a tax payer in its own right. The owners of a close corporation are called members. Membership is restricted to natural persons and under certain conditions trusts. Such members do not hold shares but have a member’s interest in the entity. This member’s interest is expressed as a percentage. The minimum number of members is 1 and the maximum number of members allowed is 10. From a taxation perspective, the close corporation is treated in a similar manner as a company. This is a common form of business entity for smaller businesses.
A statutory close corporation is characterized by its traditionally small size, its consolidated management structure, and the statutory restrictions on the transfer of its shares. There are approximately 6,000 close corporations currently existing in Missouri. A statutory close corporation’s shareholders generally may not transfer their shares of stock without allowing the corporation’s other shareholders a right of first refusal and the corporation may operate without a board of directors and in some instances without bylaws. The close corporation election is made in the entity’s articles of incorporation.
A close corporation is designed to make it easier for a corporation with a small number of shareholders (number varies from state to state) to operate as a corporation. A close corporation can choose not to have a board of directors, annual meetings or bylaws if so stated in its articles of incorporation.
A close corporation, also known as a closely held corporation, is a corporation in which (1) the stock of the corporation cannot be traded on a public exchange (NYSE, NASDAQ, etc.); (2) the number of shareholders must be specified, and typically cannot exceed 30; and (3) certain limitations may be placed on the transfer of stock. A close corporation can be advantageous for small businesses. Note that LegalFilings does not charge additional fees for electing to form a close corporation. Simply indicate that you would like a close corporation on the order form.
