Close Corporation for Dummies

Hey there! Let's talk about what "Close Corporation" means. Imagine you and a few of your friends decide to start a lemonade stand together. You work together to make delicious lemonade, sell it to your neighbors, and keep track of all the money you make. Well, that's kind of like a close corporation!

When a group of people, like friends or family, decide to start a business together and run it themselves, it can be called a close corporation. In a close corporation, the ownership and control of the company are limited to a small number of people. These people might all be friends or relatives who trust and believe in each other's abilities to make the business successful.

Let's think about it this way: Imagine you and your friends are organizing a party, and you can only invite a small group of your closest friends. You know these friends really well, and you trust them to have fun and make the party a success. That's how it works with a close corporation too. The owners have a tight-knit relationship and trust each other to make the business a success.

Now, close corporations usually have some unique features. One of them is limited liability. This means that if something goes wrong in the business, the owners' personal assets, like their house or car, are generally protected. Another feature is that the shares of a close corporation are not typically made available to the general public. Instead, the shares are usually held within the group of owners.

You might be wondering, what's the difference between a close corporation and a regular corporation? Well, the main difference is that in a regular corporation, the ownership and control can be spread out among many different people, and the shares of the company can be bought and sold on the stock market. Close corporations, on the other hand, are more like a small, tight-knit group where the owners have a direct role in running the business and making decisions.

So, to sum it up, a close corporation is a type of business where a small group of people, like friends or family, decide to start a company together and run it themselves. They have a tight-knit relationship and trust each other to make the business successful. The owners typically have limited liability, and the shares of the company are not available for trading on the stock market.