A closely held corporation refers to a type of business organization that is privately owned and controlled by a limited number of shareholders or a single family. This company structure is characterized by a small number of shareholders who typically hold a significant portion of the company's shares, resulting in concentrated ownership and control. The shares of a closely held corporation are not publicly traded on a stock exchange, and most often there is no market for these shares outside the company.
The ownership of a closely held corporation is typically limited to a tight-knit group of individuals, often including family members, close friends, or a small group of investors. These shareholders usually play an active role in the management and decision-making processes of the corporation, as they possess a significant amount of control over the company's operations.
In a closely held corporation, decisions regarding business strategies, financial matters, executive appointments, and other key aspects are usually made by the majority shareholders, often through informal discussions or consensus-building mechanisms. This structure allows for a more flexible and centralized decision-making process, as compared to publicly traded corporations where decision-making involves a larger number of dispersed shareholders and may follow more formal procedures.
Overall, closely held corporations offer distinct advantages such as increased privacy, flexibility, and agility in decision-making, but they also come with challenges related to succession planning, governance, and access to capital.
