Closed Corporation

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DEFINITION of 'Closed Corporation'

A business that is set up using a corporate business structure, but in which all the shares are held by a select few individuals who are usually closely associated with the business. Participating in a closed corporation enables a partnership to benefit from liability protection without dramatically changing the way that the business operates.

INVESTOPEDIA EXPLAINS 'Closed Corporation'

Closed corporations are not publicly traded on any stock exchanges and are, therefore, closed to investment from the general public. Shares are often held by the owners/managers of the business and sometimes even their families. When a shareholder dies or has a desire to liquidate his or her position, the business or remaining shareholders will buy back the shares.

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