California Close Held Corporation

A California Close Corporation is a special type of California Corporation designed for small privately owned businesses. A Close Corporation is a California Corporation, with all of the liability protection benefits of a standard corporation and can either be taxed as separate entity (same as a C Corporation) or elect to have its taxes passed through onto the shareholder's personal tax return (an S Corporation)*. Why does CCC specialize in the formation of Close Corporations? Because in our opinion it improves the liability protection aspects of small privately owned corporations.

The main benefit of a Close Corporation is that it is easier for a small business owner to run and less likely to be pierced, because the shareholders of a Close Corporation can choose to waive some of the corporate formalities required of standard corporations, such as the requirement to hold annual shareholder's and director's meetings. The shareholders of a Close Corporation can also appoint themselves as “Managers” of the corporation, merging their separate offices (shareholder, officer and director) into one.

The primary reason most people incorporate is for liability protection. Of course, plaintiff's lawyers don't like the fact that you have assets shielded from exposure to their claim, so the will try to pierce through the corporation to your personal (or other business) assets. This process is called “piercing the corporate veil”. There are a number of elements such a lawyer must prove in order to pierce through the corporate veil. One of the most important of these elements, which frequently trips up small business owners, is the requirement to maintain corporate formalities, particularly the requirement to hold annual meetings and keep minutes of such meetings.

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