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. Closely Held Stock

    A closely held stock is when the vast majority of common shares ...
  2. Private Company

    A company whose ownership is private. As a result, it does not ...
  3. Privately Owned

    Privately owned refers to businesses that have not offered public ...
  4. Corporation

    A legal entity that is separate and distinct from its owners. ...
  5. C Corporation

    A legal structure that businesses can choose to organize themselves ...
  6. IRS Publication 542

    A document published by the Internal Revenue Service (IRS) that ...
Related Articles
  1. 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.
  2. 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.
  3. Managing Wealth

    Know Your Shareholder Rights

    Common stock owners have numerous privileges and should be vigilant in monitoring a company.
  4. 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.
  5. Managing Wealth

    How to invest in private companies

    It can be tough to analyze a company that doesn't trade publicly, but there are several advantages.
  6. 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).
  7. Investing

    Valuing Private Companies

    You may be familiar with publicly-traded companies, but how much do you know about privately-held firms?
  8. Taxes

    Taxes in New York for Small Business: The Basics

    Learn how small businesses are taxed in New York, and understand how tax rates vary based on whether the business is an S corporation, LLC or partnership.
  9. Small Business

    Should You Incorporate Your Business?

    Find out how becoming a corporation can protect and further your finances.
  1. What are some of the key reasons a large corporation might prefer to remain a private ...

    Understand the reasons why a large corporation would want to remain as private instead of going public through an initial ... Read Answer >>
  2. In what context is a corporation considered to be an individual entity?

    Read about when a corporation is considered an individual entity, when it is not and why corporations are not considered ... Read Answer >>
  3. 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 >>
  4. How do a corporation's shareholders influence its Board of Directors?

    Find out how shareholders can influence the activity of the members of the board of directors and even change official corporate ... Read Answer >>
Hot Definitions
  1. Standard Deviation

    A measure of the dispersion of a set of data from its mean, calculated as the square root of the variance. The more spread ...
  2. Entrepreneur

    An entrepreneur is an individual who founds and runs a small business and assumes all the risk and reward of the venture.
  3. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  4. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  5. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
  6. Income Statement

    A financial statement that measures a company's financial performance over a specific accounting period. Financial performance ...
Trading Center