What is a Close Corporation?

Posted by Katherine L. Taylor, AttorneyOct 27, 20210 Comments

Have you ever heard somebody say that they own a "close” corporation and wondered what
that means?

A close corporation, sometimes referred to as a “closed” corporation, is a less formal way of
running a business; the shareholders have elected to have no board of directors. In a regular
corporation, the shareholders elect board members, who run the business on a day-to-day
basis. In a close corporation, the shareholders say, "we don't want that middle-man level or
middle-woman level, we want to run the business directly ourselves."

In order to become a close corporation, the shareholders have to make a formal election and file
that election with the appropriate state agency (in Maryland, it has to be filed with the State
Department of Assessments and Taxation).

Close corporations tend to have a very small number of shareholders or shareholders who are
family members because the purpose of becoming a close corporation is to simplify the
operation of the business and not create conflict. By getting rid of the board of directors, you
reduce a lot of the formalities.

If you're interested in more information, maybe you have a business that you think would benefit
from being run as a close corporation, feel free to contact us. You can visit our website for
contact information.

KATHERINE L. TAYLOR, ATTORNEY AND CPA

5850 Waterloo Rd

Suite 140

Columbia, MD21045

443-420-4075

443-420-4075 (fax)