What is a Closely Held Corporation? What is a Publicly Held Corporation?

The difference between a closely held corporation and publicly held corporations is that a publicly held corporation is owned by stockholders who buy and sell corporate shares on the stock market. A closely held corporation is owned by a close-knit group of shareholders that do not publicly trade their stock in companies. Learn more in our free legal guide below.

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Jan 26, 2021

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closely held corporation, or private corporation, is one that is owned by private individuals who do not trade or sell their shares of ownership. This is in contrast to publicly held companies. Typically, closely held corporations are not subject to the same stringent reporting requirements as most public corporations.

What is a closely held corporation?

The biggest difference between close or closely held private companies and publicly held or traded companies is that a closely held corporation has a tight-knit group of shareholders that make up the ownership committee for the business, while a publicly held corporation is one that is owned by stockholders. In a publicly held business, the ownership shares of the corporation are traded publicly on the international stock market.

A publicly held company is owned and valued by the worth of its stockholders. People purchase shares of the company in the hope that the company will increase its net worth so that their shares end up being worth more than they were when they purchased them. It is easy to assess the value of a publicly held company. In addition, selling and buying shares is as simple as placing an order with any broker or brokerage firm.

The private corporation, on the other hand, is owned fully by shareholders that do not trade or sell their stock in the company unless they are opting to sell out their portion of ownership in the business to other owners. The corporation’s bylaws usually give the first option to purchase these shares to the other shareholders before they are offered to anyone else as a means of “buying in” to the company. Valuing a closely held company is also much more difficult since there is no general marketplace for its sale.

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