Close Corporation Questions
What is a close corporation?A close corporation is considered a corporation that is owned by a certain number of stockholders. The laws on the requirements that oversee a close corporation vary from state to state, many laws state that a close corporation cannot have more than 35 shareholders. A close corporation normally includes family members or members that are close to the family who owns the business. Read below where Experts have answered many questions relating to a closed corporation.
What are the advantages of a close corporation?When owning a close corporation there can be many advantages and disadvantages, these all depend on the type of corporation. Below are some of the advantages when having a close corporation:
• Less rules and responsibilities than other corporations, government requirements are more relaxed with dealing with a close corporation.
• Increased control over the shares. Normally shareholders will outline a joint agreement that focuses on the buy and sell situations.
• Less difficult arrangement. Close corporation requires fewer responsibilities so there will be a less of a chance that an error being made in the arrangement process. Less complications and not as costly to maintain in the future. In this agreement the shareholder usually is granted the first rights in refusing any sales and transfers.
What is a close corporation agreement?A close corporation agreement is a legal document made in order to confirm a business as a close corporation. This agreement normally enables the corporation to operate without any of the strict rules and responsibilities that the standard corporations have to abide by.
What is liquidation of close corporation?A liquidation of a Close Corporation is defined as a legal process where the company and its affairs is to be found under the control of a liquidator who must understand the possessions and divide the possessions between the creditors according to the requirements in the Companies Act. The most important point of liquidation is to divide the yield from the sale of any possessions between the creditors evenly and to suspend the company in an arranged conduct.
What are the characteristics of a close corporation?Some of the unique differences of a close corporation include:
• The name of the corporation- at the end it must have “CC”.
• Legal personality- a close corporation is a separate legal unit from the members.
• Capital donation- the members of the corporation must make an early donation in the form of money to either the possessions or services.
• The number of owners- there can only be a minimum of one and maximum of ten.
• Liability- the liability of the members for their debts of the business in limited to the investment, that way any personal possessions are protected.
• Continuity- a close corporation can continue even if new members arrive or existing members leave.
• Profits and losses- the profits and losses are shared in agreement to the membership percentage that must total up to 100%.
• Management- the members manage the business alone unless agreed differently.
When deciding if a close corporation is right for you business there is many requirements that need to be met. A close corporation is different from other corporations and often times a close corporation is more laid back. Consult in the Experts on deciding if a close corporation is right for a business.