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Closed corporation: How it works, requirements, partners and more 

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What is a closed stock company?

Coming from corporations, this modality specializes in a mode of operation that does not exceed 20 people. These can be either natural persons or legal entities that start the commercial activity. Each one of them participates in different processes of the company, either in the administrative area, in the general management or in the representation of the company.

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The closed stock company is mainly used in cases of incorporation of family businesses or consolidation of small and medium business projects. It is considered one of the most important capital companies, with a share capital that is formed from shares.

Characteristics of a closed stock company

As for the organization of the closed corporation, it must have a director, an optional position, as well as a management and a shareholders’ meeting to manage the company. These bodies will hold ordinary and extraordinary meetings, the purpose of which will be to work on and review the previous year’s financial statements, as well as dividends, directors and so on. Extraordinary meetings will be held in case the company requires a specific activity.

Let’s look at some of its other characteristics:

Liability of a company with a closed corporation: for this type of company, the activity of the partners in relation to the company is limited, which implies that, in case the company acquires debts and obligations on its behalf, the partners will not have to respond to them with their own assets.

Share capital: like the corporation itself, this modality does not have a minimum capital established within the capital or patrimony of the company. Thus, the capital can be constituted either by goods or by cash, if it is by goods, it requires the valuation of an expert to examine its economic value.

Shares: the shares in this company are differentiated according to the nominal value, although it can also be established from the benefits that are related to them. This is because they can depend on a minimum dividend.

Corporate purpose: it is of great importance that the activities of the company, which will be carried out in the near future and to which it will be fully dedicated, are informed and duly registered.

Partners: although the number may vary in each country, usually this type of partnership requires at least two people or partners, and reaches its maximum number with 20 partners. In this process, it is necessary to appoint a general manager and thus establish the functions to be performed by him with respect to the partnership.

Duration of the closed corporation: although the duration of this corporation does not necessarily have a determined time, in many cases it is required that, if the duration is clear, it is manifested and registered. If it is not calculated, it can be mentioned or not, in this way it will be understood that its duration is indefinite.

Requirements: as we mentioned, the ideal is to have at least two partners for the constitution of the company. Likewise, it will be necessary to have three directors who form part of the company’s board of directors. Subsequently, a copy of the D.N.I. is attached, a document that must be free of any kind of debt or obligation present.

In this process we include the corporate name of the company, it must be clear the purpose or activity of the company, which will be duly registered, the type of capital of the company, ie whether it will be in kind or in cash, among other aspects that may vary according to the country and its regulations.

What is a closed stock company

Steps to create a closed corporation

The company starts its activity once it obtains the deed of incorporation, however, to reach it, it will be necessary to perform the public deed, a document that includes basic and fundamental aspects of the company. In this register will appear the capital formed by the company, the number of shares in which it can be divided, the company name, the corporate purpose, the name or company name which will be the name of the company, information of the partners, among other data.

It is important to take into account that in order to choose the corporate name, a previous search must be carried out within the public registries, in this way we can be sure that we will not use the same name as another company already legally constituted and established in the market.

Bank account: the closed corporation requires the opening of a bank account where the money of the social capital constituted by the partners and contributed goods will be deposited. With the opening and deposit of the money, the bank will issue a certification that must be presented as one of the key documents for the incorporation of the company.

Advantages of a closed corporation

There are several reasons why opening a closed corporation is one of the best options for those who have decided to consolidate their business project with few people. Among them, we find that it is a modality that can be put on sale without this necessarily leading to the dissolution of the company structure, this without counting that they have an efficient capacity to accumulate wealth and profits. These can be transferred from the shares.

Another aspect to be considered is that it is one of the types of companies that have the greatest facility for obtaining credit, even those that operate in the long term, especially when offering large payment guarantee assets. In addition, the partners do not respond personally, that is, with their assets, to the obligations of the company, so there is a protection of personal assets, a fundamental aspect for each of the members.

Keep in mind that the laws, procedures and other specifications may vary according to the country, so it is necessary to be aware of the updates in this type of process at the time of incorporating a company. This implies having the support of an expert in the process.