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Many closely held corporations are on the small side, but some are rather large. If a shareholder in a closely held corporation wishes to sell his or her shares, one of the other shareholders must purchase them because public sales of shares aren't allowed.
Generally, a closely held corporation is a corporation that: Has more than 50% of the value of its outstanding stock owned (directly or indirectly) by 5 or fewer individuals at any time during the last half of the tax year, and. Isn't a personal service corporation.
The primary benefit of forming a closely held corporation is that there is limited liability for its owners and shareholders. While a sole proprietorship isn't legally distinct from its owner, in a closely held corporation, the corporation, and not the corporate shareholders, is responsible for paying off debts.
A closely held corporation is a corporation which is owned by an individual or small group of shareholders, who are often members of the same family. Shares of a closely held corporation are generally not traded in the securities market(s).
Usually, a \u201cclose corporation\u201d or a \u201cclosely held\u201d business is one with only a handful of owners. Oftentimes, a closely held company is one owned by a family or by a few partners.
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Despite the above benefits, a closely held corporation also has some drawbacks, including: Raising capital. It is more difficult to use share equity to raise funds, since the shares of a closely held corporation are not listed on a public stock exchange for investors to purchase.
Definition of closely held : having most stock shares and voting rights in the hands of a few a closely held business.
In California, for example, the maximum number of shareholders allowed in a close corporation is 35, while in Arizona, a close corporation may have no more than 10 original investors. Close corporations differ from general stock corporations, more commonly known as C corporations, in that they are not publicly traded.
The IRS has the clearest definition: For corporate tax purposes, a closely held corporation is one where more than half of the stock is owned (directly or indirectly) by five or fewer individuals at any time in the second half of the year.
(1) Interest in closely held business For purposes of this section, the term \u201cinterest in a closely held business\u201d means\u2014 (A) an interest as a proprietor in a trade or business carried on as a proprietorship; (B) an interest as a partner in a partnership carrying on a trade or business, if\u2014 (i) 20 percent or more of ...

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