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View Diary: Justice Breyer, what is a "closely held" company? (106 comments)

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  •  Actually, it's not "subjective". The IRS says: (8+ / 0-)
    Question: Can you give me plain English definitions for the following: (1) a closely held corporation, (2) a personal holding corporation, and (3) a personal service corporation?

    Answer:

    Generally, a closely held corporation is a corporation that:

    Has more than 50% of the value of its outstanding stock owned (directly or indirectly) by 5 or fewer individuals at any time during the last half of the tax year; and

    Is not a personal service corporation.

    The definitions for the terms "directly or indirectly" and "individual" are in Publication 542, Corporations.

    A closely held corporation is subject to additional limitations in the tax treatment of items such as passive activity losses, at-risk rules, and compensation paid to corporate officers.

    If you get confused, listen to the music play - R. Hunter

    by SpamNunn on Tue Mar 25, 2014 at 02:50:31 PM PDT

    [ Parent ]

    •  Nothing requires the court to adopt the tax (12+ / 0-)

      definition.  We see this all the time.

      For example, for tax purposes, a single-member LLC doesn't exist, and the sole owner is the party bearing the tax.  But under state law, a single member LLC certainly exists as an entity separate from its owner and is entitled to that liability shield.

      So, while this is one possible definition, it is not the only one.

      Hey, Republicans, the whole world is watching.

      by TAH from SLC on Tue Mar 25, 2014 at 02:57:15 PM PDT

      [ Parent ]

    •  I beleive it says persons, right? (4+ / 0-)
      Recommended by:
      pat bunny, TAH from SLC, burlydee, Kevskos

      So  Hanover Square Maiden Lane #6, Inc., owned by five different hedge funds could be a closely held corporation with its own religion.

      •  probably not (0+ / 0-)

        unless the total amount of shares owned by the hedge funds comprises less than fifty percent  of the total shares the company issued.  or unless all these hedge funds are in collusion.

        a closely-held corporation is one in a controlling amount of shares ---of the total amount of shares that were issued-- is owned by an extremely few number of owners.

        the fewer the owners of those shares and the more shares they own (such as the koch boys owning 84%), the more a closely-held public corporation resembles a private company.

        private companies are usually closely held in being owed by a few few number of owners without shares having been issued or offered for sale to the public.

        private companies often 'go public' in order to get themselves immediate cash - the money buyers pay now to share in future profits.  Of course, that also means the owners of shares are sharing in future risks such as no profits (no dividends declared).  it's a form of high class gambling in/on the economy.

        i believe private companies are subject to some different rules, rights and advantages than public corporations, because they are not sharing any risks with "the public" so the public is presumed not in need of regulatory protection.

        if you want to invest blue, buy municipal bonds that lend your money to support public education, infrastructure, and that sort of thing ...in the city and state where you live if you want the interest they bring you to be tax-exempt, otherwise anywhere around the u.s.  there are good-quality munis around that pay 4 percent, which is a manageable interest rate for your city and county and state to pay back (it beats home loan rates and credit card rates) and it's a decent amount of "rent" for us to earn on renting out our money in a good cause.

        just my opinion, of course, and you do need a very knowledgeable honest bond broker to find them for you.

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