Maryland Close Corporations
The first decision you make when you establish a business is to choose the entity type. This decision determines how the leadership of your business will run, which documents you must file, and how the IRS will assess tax obligations for your business. People have opinions about which entity type is the best, but they can only speak from their own experience. Maryland offers so many choices of business structures because different structure types are advantageous for different types of businesses. One business entity type available in Maryland is the close corporation; not all states offer this option. Close corporations operate like corporations in terms of their taxation and document filing rules, but unlike most corporations, they do not have a board of directors, nor even a single director. If you are planning to register a new business and want professional guidance on comparing your options for business entity types, contact a Washington, D.C. small business lawyer.
How Does a Close Corporation Work?
Most corporations have a board of directors, and they have shareholders. The board of directors makes decisions, and the shareholders, who have invested in the company, profit from those decisions when they are profitable. A close corporation is so called because the shareholders are closely involved in the company’s decisions. The company has no board of directors. It does not even have a single director.
Instead, the shareholders vote on decisions, as a board of directors would do in an ordinary corporation. Their decisions must be unanimous. The company’s articles of incorporation should state that the courts of Maryland can resolve instances of deadlock among the shareholders.
How to Form a Close Corporation
To form a new close corporation, simply state in the articles of incorporation that your company is a close corporation and has no board of directors. You can change a corporation to a close corporation by amending its articles of incorporation so that no one holds the position of director.
Should You Choose a Close Corporation or Another Small Business Entity Type?
The close corporation business entity designation works best if the company is small and if its shareholders want to be involved in its decisions. If you can tell that disagreements among shareholders are likely to be frequent, then you should probably choose a business structure that has a director or board of directors separate from the shareholders. If you are operating the business alone or operating it jointly with a few family members or longtime friends, then you might not even need a business structure as complex as a close corporation. The best way to make an informed decision about choosing a business structure designation, close corporation or otherwise, for your business is to consult a lawyer about the matter.
Contact Tobin O’Connor Concino P.C. About Establishing a Close Corporation
A Washington, D.C. small business attorney can help you take the preliminary steps to establish a new close corporation in Maryland. Contact Tobin O’Connor Concino P.C. in Washington, D.C. or call 202-362-5900.
Source:
egov.maryland.gov/BusinessExpress/Account/LogOn?ReturnUrl=%2fBusinessExpress%2fUBD%2fCreate#/
