Closely held corporation

A closely held corporation is a company whose shares are mostly held by a small group of investors. Family owned businesses are usually considered to be closely held, and are commonly managed by family members. The shares of such an entity are not usually publicly traded.

The IRS defines a closely held corporation as one in which five or fewer investors own at least half of all outstanding shares at any point during the last half of the tax year, and which is not a personal service corporation. Examples of personal services are accounting, consulting, and the practice of law.

It can be difficult to obtain a valuation of the shares of this type of entity, since there are so few sales of the shares from which a price can be inferred.