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What is a New Jersey Closely Held Company?

Many times the question about what is a New Jersey "closely held company" comes up. In this video Charles Internicola discusses the characteristics that make up a closely held company. Is your company "closely held"? In the State of New Jersey, closely held companies, typically:

  1. Have a few shareholders who also are officers of the company and employees of the company – that is, the owners of the company work for the company;
  2. File "S-Corporation" tax elections that allow the income of the company to "pass through" to the shareholders who then pay taxes associated with the income of the company (these shareholders receive an annual K-1).

Why is this distinction important? Because if you are involved in a shareholder or partnership dispute, courts give particular attention to the rights and remedies to be afforded to the shareholders of "closely held companies". That is, the Courts recognize that shareholders of closely-held companies rely on the company for their livelihood and not just as an equity investment.

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