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How is a Connecticut closely held business defined?

On Behalf of | Jan 15, 2019 | Business Formation & Planning |


That is a notably abbreviated yet reasonably responsive answer to the above headline query in today’s blog post. For, indeed, while there are specific characteristics commonly linked with so-called closely held businesses, there is no associated list of tight requirements.

That type of commercial entity in Connecticut or elsewhere is often termed various ways. The phrase “closely held corporation” is often referenced, as it its shorthand form “close corporation.”

However designated, a few general principles centrally apply to a closely held business variant.

One of them is circumscribed (i.e., non-diffuse) ownership. Unlike a commonly perceived corporation and its high number of public investors and shareholders, a closely held business is a much more tightly run and controlled enterprise. Its key decision makers typically comprise a small number of stockholders, with those individuals often having some special and long-term relationship that renders their business ties comparatively intimate. A closely run company often has a family nexus.

One often cited set-off attribute of closely held businesses relates to their company stock and its trading, which operates quite differently from how exchanges are made with larger publicly traded corporations.

The latter sees high-volume buying and selling of its shares occur routinely on large public exchanges.

Conversely, the shares of a closely held business operate decidedly in the private realm. An article discussing such entities notes that their stock is “usually traded amongst a small, well-known community such as relatives or acquaintances of the business persons.”

Just as is the case with corporations, partnerships, limited liability companies and sole proprietorships, there can be both advantages and drawbacks linked with a closely held business. An entrepreneur or other business principal with questions or concerns regarding any of those business forms might reasonably wish to consult with attorneys from a proven commercial law firm.