Close Corporation

A corporation is a legal entity authorized under state law.  A corporation is a separate legal entity from its stockholders.  Ownership in a corporation is represented by the ownership of the corporation's stock.  Since a Corporation is a legal entity unto itself, the Corporation owns the assets and owes any liabilities.  That said, the control or management of the assets of the Corporation are duties of the Officers and Directors of the Corporation.  The Officers and Directors have a fiduciary duty to the Corporation, its assets and to its shareholders to make prudent decisions and take actions that benefit the Corporation even if those actions do not benefit the Officers and Directors.

Generally, there are two forms of sale of stock.  The first sale is one in which the corporation receives the net proceeds from the sale.  The second type of stock sale involves a secondary sale in which the corporation that originally issued the stock does not receive any additional money when its stock is sold.

A close corporation is a privately held corporation in which there is one or at most a small number of shareholders.  Close corporations are regulated by State close corporation statutes and generally operates more informally than regular corporations.  A closely held corporation is one in which the stock is not traded on any exchange.  close corporation is occasionally and erroneously called a closed corporation.

© 2009 by Michael C. Dennis.  All Rights Reserved.  Michael is the author of "Credit and Collection Handbook."