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PocketMatrix • View topic - What is a Close Corporation?
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What is a Close Corporation?


What is a Close Corporation?

Postby CARPEDIEM » Jul 11, 2001 @ 10:50pm

Hey guys, i'd like to ask for a favour... You see, we are working on a fully functional Company called Ionside, i got some papers from the business guy, Shervin Pishevar, they are documents that i have to sign to formally incorporate the Company in Maryland, but the thing is that i don't feel confortable about signing these documents without even knowing what a Close corporation is about, I've asked my parents about this and they say a close corporation does not exist in argentina, so basically they don't know if it can bring any trouble to me.<br>I'd be really thankful if you guys could tell me what a close corporation is, and more important, that if being a director of such a corporation can cause any type of trouble to me.<br>What i mean by this is that... What is the worst thing that can happen, and what concecuences would that bring about?.<br>If tragedy strikes us, will i have to pay any money out of my pocket or have trouble with the law?.<br><br>Thanks in advance guys, i know some of you know what i am talking about, or maybe your parents do so if you could do this one favour to me i'd be very very thankful.<br><br>
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Re: What is a Close Corporation?

Postby randall » Jul 11, 2001 @ 11:24pm

A close corporation is the same thing as a "closely held corporation".  It usually refers to small businesses that want to issue stock, but it has certain limitations.<br><br>1.) The number of stockholders is limited. I don't remember the exact number but it is usually under 40.<br><br>2.) There are sometimes certain limitations on how the stock can be transferred, such as issuing an employee stock.<br><br>3.) The stock cannot be publicly traded on a public stock exchange. This means NASDAQ, NYSE, etc.<br><br>Keep in mind, the person or "group" that has the majority of stock maintain control of the company. It wouldn't be wise for you to give you're employees 1,000 shares, if you only have 100 shares. You'd lose control since you don't own as much interest in the company.<br><br>Regardless, all shareholders become "owners" with the right to manage the company. It eliminates the need for a board of directors and is run more like a partnership, where each partner shares in the profits and losses. Each partner is not necessarily "equal" though. Just like a Partnership, that needs to be sorted out beforehand- the role of each partner.<br><br>I'm sure you can look some of this info up on the internet, and it will probably be much more accurate than what I have stated. Depending on the direction you want to take the company, this can be a very good option.<br><br>Last modification: randall - 07/11/01 at 20:24:12
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Re: What is a Close Corporation?

Postby randall » Jul 12, 2001 @ 1:04am

Wait, why did I recite all that stuff? I'm sure your attorney told you all that already.<br><br>With a sole proprietorship, if the company is sued then your personal assets are at stake. A close corporation protects you to a certain extent. You and your personal assets are seperate from the company. If the corporation is sued, then only the corporate assets are at stake and your personal assets are safe.<br><br>Anyway, look it up on the internet, you can get plenty of details. And you can cross reference the information as well, ensuring that it is accurate.<br><br>Last modification: randall - 07/11/01 at 22:04:20
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Re: What is a Close Corporation?

Postby CARPEDIEM » Jul 12, 2001 @ 7:49am

Thank you very very very much Randall, you've been very helpful.<br>The problem with seaching on the internet or reading directly from the documents i received is that the language is too specific and i don't understand what they are trying to say.<br>But thanks to your explanation i sort of get it.<br>Anyways, what i am really interested in is what do you mean by "protected to a certain extent". In what case could the corporation make me use my personal assets to get out of trouble?<br>
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Re: What is a Close Corporation?

Postby randall » Jul 12, 2001 @ 11:34am

"Protected to a certain extent" just means it's not like a Sole Proprietorship, where the owner and corporate assets are tied together.<br><br>Under a Close Corporation each shareholder shares in the risks, so they can't come after your personal assets as long as your obligations to the company have been met. That means as long as you aren't trying to defraud, evade taxation, and mix your assets with the comorporate assets.<br><br>If you buy a pocketPC with the Corporate credit card, that PocketPC is not yours. You can use it to the extent that "you own it", but it is really owned by the comapny and part of the corporate assets.<br><br>Also, all projects and intellectual property are owned by the company. This is very difficult, because you can't just take your project and leave the company since you don't personally own it. Remember, the person or group that have a majority of shares run the corporation.<br><br>You could limit the shares to Carpe, Fredrik and Lomax, ensuring that there are three equal partners.<br><br>Taxes are also handled differently, since the shareholders share the profits and losses. I don't know much about the tax part of it though.
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Re: What is a Close Corporation?

Postby randall » Jul 12, 2001 @ 11:37am

Also, I am not sure, but there are certain limitations that restrict non-US citizens from holding stock in a corporation. I think that only applies to S-Corporations, but I am not sure. So check that out FIRST.
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Re: What is a Close Corporation?

Postby Moose or Chuck » Jul 12, 2001 @ 11:50am

I want to buy some stock, Carpediem. Seriously. When you're up and running send me your portfolio and any other info you can get for me.
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Re: What is a Close Corporation?

Postby John Lomax » Jul 12, 2001 @ 12:36pm

I dont really have any links to ionside. As I already have a job, but I would of course like to keep links with those guys. Providing they like what they get :)<br><br>J.
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Re: What is a Close Corporation?

Postby randall » Jul 12, 2001 @ 12:58pm

They can set their own limitations on how the stocks are traded. Shareholders normally get the first option to buy stock offered by another shareholder.<br><br>Stock is often offered to employees as a perk. In some cases, employees get a $1 (one dollar) annual salary and 30,000 stock options.
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Re: What is a Close Corporation?

Postby CARPEDIEM » Jul 12, 2001 @ 6:39pm

Hey Randall, this is an S-Corporation, my dad told me he noticed something strange in the documents that said something about that only Maryland citizens could own Shares.<br><br>I think we may have a problem there, i'll look into it man, i seriously thank you!.<br>
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Re: What is a Close Corporation?

Postby suchiaruzu » Jul 12, 2001 @ 6:43pm

Whoa, Randall, you're a real expert, not only in airbrushing! :)
<div align="center">Image<br></div>
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Re: What is a Close Corporation?

Postby randall » Jul 12, 2001 @ 9:07pm

Oh hell no. I took business courses a couple years ago in college. I was really intimidated when I first walked into the class, because 80% of the class was Japanese. I thought they were going to whomp on me with some of their "Japanese Business Sense".<br><br>To make a long story short, I came out at the top of the class with the highest GPA.<br><br>Still, that was a few years ago, so my info may be a bit rusty.
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Re: What is a Close Corporation?

Postby suchiaruzu » Jul 12, 2001 @ 9:15pm

Wow, I'm amazed, but it's a little late to say congrats, isn't it? ;)
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