What is a 'Closed Corporation'

A closed corporation is a company whose shares are held by a select few individuals who are usually closely associated with the business. Such a corporate business structure is known by a variety of other names, such as "close corporation," "privately held company," "private company," "family corporation" or "incorporated partnership." Such a company may be referred to as "closely held," "unlisted or "unquoted." By structuring as a closed corporation a partnership can benefit from liability protection without dramatically changing the way that the business operates. It can also offer companies greater flexibility in operations, as they are free from most reporting requirements and shareholder pressure.

Breaking Down '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. Because so few parties have ownership shares and no shares are publicly traded there can be issues with liquidity. However, there also exists a built-in incentive to treat each shareholder, director or officer fairly.

Publicly traded companies receive more attention that closed companies because of their listed status and the associated reporting requirements, such as annual reports. Closed companies have less of a reporting burden and therefore a lesser obligation to transparency. They are not required to publish financial statements or disclose their financial outlook. This added level of secrecy can prevent competitors from learning about a company's plans and give closed corporations greater flexibility in how they operate. For example, they do not have to answer to shareholder actions or quarterly profit targets which could affect how they conduct business.

Closed Corporation Examples

There are closed corporations all over the world, including well over 400 in the United States. They are involved in a wide variety of business pursuits, from retail and manufacturing, to business services and financial services. Forbes' 2017 ranking of the top 225 U.S. private companies found that the largest is Cargill, Inc., a conglomerate that trades and distributes agricultural and other commodities such as grain, livestock, steel, edible oils and other foodstuffs. In 2017 it employed over 150,000 workers and had revenues of over $100 billion. Other large U.S.-based private companies include:

  • Koch Industries, Inc.: A multinational involved in a variety of industries, such as manufacturing, trading and investing, that earned over $100B in 2017.
  • Albertsons Companies LLC: The second-largest supermarket chain in the United States with over 2,200 locations and some $60B in revenue in 2017.
  • Mars, Inc.: A global candy, pet food and food product manufacturer that is 100% family owned. It earned roughly $35B in 2017.

S. C. Johnson & Son, Hearst Communications Inc., and Publix Super Markets, Inc. are other well-known U.S. closed corporations. Some examples of non-U.S. closed corporation are Sweden's IKEA, Germany's ALDI and Bosch, and Denmark's LEGO.


  1. Private Company

    A private company is a company held under private ownership with ...
  2. Closely Held Stock

    A closely held stock is when the vast majority of common shares ...
  3. Corporation

    A corporation is a legal entity that is separate and distinct ...
  4. Closely Held Shares

    The shares in a publicly traded company held by a small number ...
  5. Privately Owned

    Privately owned refers to businesses that have not offered public ...
  6. Company

    A company is a legal entity formed by a group of individuals ...
Related Articles
  1. Financial Advisor

    Understanding S Corporations

    This corporate structure is favored by many entrepreneurs, including financial advisors. Here's an overview of its advantages and disadvantages.
  2. Taxes

    S Corporation versus LLC: Which should I choose?

    Learn about the major distinctions between an S corporation and an LLC and the important factors to consider when choosing your business structure.
  3. Small Business

    Why Companies Stay Private

    Many private companies prefer to stay private and find alternate sources of capital. Find out what firms have to gain by eschewing the windfall from a flashy IPO.
  4. Know Your Shareholder Rights

    Common-stock owners have numerous privileges and should be vigilant in monitoring a company.
  5. Small Business

    Which Type of Organization Is Best For Your Business?

    Learn the differences between the types of business organizations so you can determine how to best structure your business for tax and liability limitations.
  6. Insights

    Top 25 Richest American Families

    Find out who America's wealthiest clans are. Number 3 may give you a stomach ache.
  7. Taxes

    Do U.S. High Corporate Tax Rates Hurt Americans?

    The United States has the highest corporate tax rate of the 34 developed, free-market nations that make up the Organization for Economic Cooperation and Development (OECD).
  1. How does privatization affect a company's shareholders?

    The most recognized transition between the private and public markets is an initial public offering (IPO). Through an IPO, ... Read Answer >>
  2. Can private corporations issue convertible bonds?

    The first step to answering this question requires defining the term "private corporation". Many times, the term "private ... Read Answer >>
Hot Definitions
  1. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
  2. Enterprise Value (EV)

    Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to equity market ...
  3. Relative Strength Index - RSI

    Relative Strength Indicator (RSI) is a technical momentum indicator that compares the magnitude of recent gains to recent ...
  4. Dividend

    A dividend is a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.
  5. Inventory Turnover

    Inventory turnover is a ratio showing how many times a company has sold and replaces inventory over a period.
  6. Watchlist

    A watchlist is list of securities being monitored for potential trading or investing opportunities.
Trading Center