Form a Close Corporation, for free.

A close corporation suits a small, fixed group that wants corporate structure without the formality and wants to control who can own shares. A standard C-corporation is the choice if you'll raise outside capital or grant broad options. An LLC already lets a small group manage directly with pass-through tax and less paperwork, which is why many families choose an LLC instead. The close corporation earns its place when you specifically want a corporation, S-corp eligibility, and tight ownership control together. Our LLC vs. corporation breakdown can help you weigh it.

Most states cap it, commonly around 30 to 35 shareholders, though the exact number varies by state. The cap is the defining feature: it's what keeps the company "close." If your group grows past the limit, the entity generally has to convert to a standard corporation, which removes the relaxed formalities and transfer restrictions. If you expect to add many owners over time, a standard corporation or LLC is usually the better starting point.

In most states that offer a statutory close corporation, yes: the shareholders can agree to manage the company directly and skip the formal board, annual meetings, and much of the minute-keeping a regular corporation requires. That's the main appeal. You'll still want a written shareholders' agreement to set how decisions get made, since you're taking on the role the board would otherwise play. We prepare the election that makes this possible.

They're rules, printed right on the stock certificates and set in your agreement, that stop an owner from selling shares to an outsider without giving the group a chance first. The most common is a right of first refusal: before selling, an owner must offer the shares to the company or the other shareholders at the same price. These restrictions are what keep ownership inside the family or founding group, and they're a core reason to choose a close corporation over a standard one.

Usually, yes. A close corporation is taxed as a C-corp by default, but it can file an S-corp election if it meets the IRS rules, including the shareholder limits, which a close corporation already tends to satisfy. S-corp treatment passes profit through to the owners and can reduce self-employment tax once earnings are steady. It adds payroll and a separate return, so it's a math decision. We can file the election when the timing works for your group.

Generally not easily, and that's by design. The shareholder cap and the transfer restrictions that keep the group tight are the same features that make it hard to bring in institutional investors, who expect freely transferable preferred stock and a standard board. If raising venture money is on your horizon, a standard C-corporation, usually in Delaware, is the expected structure. A close corporation fits owner-run and family businesses that fund themselves or borrow, not ones chasing a priced round.

Many states, including Delaware, offer a statutory close corporation, but not all do, and the rules differ on the shareholder cap, the election, and how much formality you can waive. Some states reach a similar result through a shareholders' agreement in a standard corporation rather than a separate close-corporation statute. We confirm your chosen state offers the structure and apply its specific requirements, so you don't file for something your state doesn't recognize.

This is exactly what the shareholders' agreement and transfer restrictions are for. A good agreement sets a buy-sell mechanism: how the shares are valued, who has the right to buy them, and how a departure, death, or divorce is handled, so an owner's exit doesn't force a sale of the business or hand shares to someone the group doesn't want. Setting this up at formation, while everyone is on good terms, is far easier than negotiating it during a crisis. We provide the framework to start from.