A “Close” Corporation is a special feature of Delaware’s Corporation Law. The business of a general corporation is managed by its board of directors. However, a corporation which elects in its certificate of incorporation or in an amendment to be governed by subchapter XIV of Title 8 of the Delaware Code, may be managed by its shareholders. By making that election the shareholders agree to have the same responsibilities as directors of a general corporation. The certificate of incorporation must contain special provisions meeting the requirements of the subchapter, including a prohibition against “public offerings” of the corporation’s stock, as well as limitations upon the transferability of shares and number of shareholders (30 or fewer).
If you do not know the type of company you want to form, click here for important information about types of companies and about federal tax considerations before proceeding.