What Is a Closely Held Corporation?

A closely held corporation is a type of business entity in which a small number of shareholders own the ownership rights. This is a type of arrangement that is often used by small businesses. With a closely held corporation, small business owners want to keep the majority of stock in the company.

With a closely held corporation, there is no public ownership as there is with many bigger companies. Instead of putting the stock out there for the general public to purchase, the owners of the company hang onto all of it.

One of the unique factors in this type of business arrangement is that the owner or owners of the company also usually manage the company. This means that the business owner or owners will make the day-to-day business decisions for the company as a whole. 

Lenders will often not provide companies that have this type of business arrangement with the same type of credit as they would a larger publicly traded company. Many times, the owners of the business will have to put up personal assets as collateral for business loans. This is done so that the lender can protect its own interests when investing in a small company. 

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