Question

1. What is a Close Corporation (or Closely Held Corporation) and what are the advantages and disadvantages of a Close Corporation?

Answer 1

Answer: -

Closely Held Corporation is the type of Private Entity. The Shares of such Entity are not Listed in any Stock Exchange. There are very limited number of shareholders in Closly Held Incorporation. The trading of shares of Closely Held Company is dominated by only relatives of such entity. General Public can not invest in shares of Closely Held Company hense risk of takeover of controlling power of such company is very difficult. Since Shares are not openly traded in open market so prices of such shares are more stable than public company.

Advantages of Close Corporation-

1. Control Over Company is strong since the shares of this company are in the hands of few people who have full power to take any decision about the company.

2.Easy Atmosphere of Regulatory Body is the another benefit of the Closely Held Corporation . Transfering of shares are easy because there in only two persons agreement and the other legal regulation and compliance are also on ease side.

Disadvantage of Close Corporation-

1. Capital Requirements fullfilment is challenging because company can not issue share to public and hence funding sources may be limited to the company.

2.Acquisition Settlement of Privately Held Corporation is very hard due to dispute of Net Worth of the company. Public Corporation is listed and more easier to valued. Finding a Capable buyer is hard for Close Corporation.