What is a close corporation?

What is a close corporation?

• A. A corporation with a large number of shareholders
• B. A corporation that trades its stock publicly
• C. A corporation owned by a small number of people, often family
• D. A corporation primarily based in foreign markets

Answer: (C)

A close corporation is characterized by ownership that is typically held by a small number of individuals, which often includes family members or close friends. This structure allows for more direct control over the company's operations and decision-making processes, as there are fewer shareholders involved. Close corporations often avoid the formalities required of larger corporations and may have restrictions on the transfer of shares to maintain the close-knit nature of the ownership. This option captures the essence of a close corporation perfectly, reflecting the private nature of its ownership and the limited number of shareholders that contribute to its operation. In contrast, the other options describe different types of corporations, such as publicly traded corporations with many shareholders or those focused on international markets, which do not fit the definition of a close corporation.

A close corporation is characterized by ownership that is typically held by a small number of individuals, which often includes family members or close friends. This structure allows for more direct control over the company's operations and decision-making processes, as there are fewer shareholders involved. Close corporations often avoid the formalities required of larger corporations and may have restrictions on the transfer of shares to maintain the close-knit nature of the ownership.

This option captures the essence of a close corporation perfectly, reflecting the private nature of its ownership and the limited number of shareholders that contribute to its operation. In contrast, the other options describe different types of corporations, such as publicly traded corporations with many shareholders or those focused on international markets, which do not fit the definition of a close corporation.