Closely Held Corporation
Closely Held Corporation
- A Closely Held Corporation is a
corporation whose incorporators have elected in its articles of incorporation to be
a closely held corporation pursuant to corporation laws of its state of incorporation.
As a general rule, all of the shares of the voting stock are owned by a very small
number of shareholders, who are often members of the same family or the officers
of the corporation. Some state closely held corporation statutes allow the corporation
to eliminate or limit the powers of the board of directors and, thereby, to seem
to relax the corporate formalities. But since the power of the Board is shifted
to the shareholders, the corporate formalities generally still apply to the
actions of the shareholders.
From a tax point of view, a close or closely held corporation is a corporation that, in the last half of the tax year, has more than 50% of the value of its outstanding stock owned (directly or indirectly) by 5 or fewer individuals. The definitions for the terms "directly or indirectly" and "individual" are in IRS Publication 542, Corporations. Generally, closely held corporations are subject to additional limitations in the tax treatment of items such as passive activity losses, at-risk rules, and compensation paid to corporate officers.
Disclaimer: The foregoing is intended to provide general information and may not be suitable in specific instances. The glossary information is not intended to be exhaustive, but rather to illustrate typical considerations. The material is provided with the understanding that it is not legal, accounting, tax or any other professional advice.
Copyright © 2003-2010 LawVantage.com, LLC. All rights reserved.
Important LawVantage.com, LLC and its website, CorporateBoardMinutes.com, do not render any legal, accounting or other consulting advice.
For legal advice, you should always consult with a qualified attorney-at-law.
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From a tax point of view, a close or closely held corporation is a corporation that, in the last half of the tax year, has more than 50% of the value of its outstanding stock owned (directly or indirectly) by 5 or fewer individuals. The definitions for the terms "directly or indirectly" and "individual" are in IRS Publication 542, Corporations. Generally, closely held corporations are subject to additional limitations in the tax treatment of items such as passive activity losses, at-risk rules, and compensation paid to corporate officers.
Disclaimer: The foregoing is intended to provide general information and may not be suitable in specific instances. The glossary information is not intended to be exhaustive, but rather to illustrate typical considerations. The material is provided with the understanding that it is not legal, accounting, tax or any other professional advice.
Copyright © 2003-2010 LawVantage.com, LLC. All rights reserved.
Important LawVantage.com, LLC and its website, CorporateBoardMinutes.com, do not render any legal, accounting or other consulting advice.
For legal advice, you should always consult with a qualified attorney-at-law.
Website development by
Vine Design.