What Is a Close Corporation?
What is a close corporation? A close corporation is one that meets all the requirements as to what is a qualified entity in the state it is registered in, what its shareholders are, and what type of business it does. A close corporation can be a real estate investment trust, partnership, limited liability company, or any combination thereof. A private, limited liability company is also a close corporation. A private, limited liability company has none of the rights and responsibilities that a public or limited liability company has.
What is a qualified entity? A qualified entity is any firm or corporation that has met the requirements that are needed to qualify for filing a report of classifying the entity as an S-corporation with the IRS. A qualified entity cannot be a corporation that has less than two owners, or one owner and one share of stock in the corporation. Also, what is a close corporation cannot be a partnership that has more than two members.
What are the general characteristics of a separate entity? A corporation is a legal entity that exists for the benefit of all the shareholders or owners. A partnership is an unincorporated joint-venture. It is a relationship in which there is a partnership interest that has separate legal attributes from the interests of the partners. A limited liability company or LLC has only one owner who is responsible for all the debts, duties, and liabilities of the business. It is also known as a sole proprietorship.
What is the purpose of the Articles of Organization of a corporation? A corporation must have Articles of Organization that provide that each shareholder or owner has a right and obligation to participate in the management and conduct of the corporation and none of the shareholders or owners will have the power or authority to bind the corporation. The Articles of Organization also provide that the corporation must have a board of directors and also that the officers of the corporation must be registered real estate agents. The Articles of Organization will also specify when meetings of the Board of Directors will be held and what meetings they will be held at and what powers the officers of the corporation have.
Are all shareholders automatically entitled to vote on anything? No. In order for a shareholder to have voting rights, he must have first invested shares in the corporation and then must sign an application stating that he actually does want to have voting rights with the corporation. The qualifications for this Article of Organization vary by state, but most states require that shareholders must be direct owners or ownerships of stock with a majority of the voting power.
What is the status of a limited liability company? A limited liability company (or LLC) is different from a corporation in the way that it is set up. Unlike a corporation, a limited liability company has no corporate structure; all that the shareholders will be entitled to is their individual shares. All income and profits pass through the individual shareholder and there are no corporate taxes or levies. This can be a great benefit to new investors, as the money that would otherwise have gone to taxes or payroll could be passed down to them.
What is a business corporations definition? A business corporations definition is really quite simple; it is an agreement between shareholders that creates one company, the corporation becomes one permanent entity and all of the business transactions and decisions are made by the board of directors. This document can also be called a operating agreement. While most business corporations are limited by their state’s laws, there are also business corporations created within the United States.
What are some of the disadvantages of a close corporation? One disadvantage is that shareholders will only have a portion of their investment (hence limited liquidity). Another drawback is that tax laws may affect the way that the corporation is taxed (the corporation must report its income and gain/loss). Some other disadvantages are that there are very few advantages compared to regular business corporations, and they don’t offer any special tax benefits.