a close corporation is a legal entity, which implies that it is not liable to pay for obligations and can acquire assets in its own name.
What is a close corporation?
Answer:
A close corporation, also known as closely held corporation, is a type of legal entity that operates much like a traditional corporation but with significant differences. One distinguishing feature of a close corporation is that it has a limited number of shareholders, often family members, friends, or business partners.
LectureNotes correctly pointed out that a close corporation is a legal entity. This legal status means that the corporation is separate from its owners, which implies that it can enter contracts, acquire assets, and incur liabilities in its own name. One of the key benefits of this legal structure is that the shareholders are generally not personally liable for the debts and obligations of the corporation beyond their investment in the company.
In a close corporation, shareholders often hold multiple roles within the company, such as directors or officers, leading to a more hands-on and centralized management structure. This type of corporation is often used by small businesses or companies where shareholders are actively involved in the day-to-day operations.
Overall, a close corporation offers a flexible and efficient way to run a business while providing limited liability protection to its shareholders.