Definition

• A close corporation can be formed under the laws of certain states. This is a regular corporation except for restrictions on the number of shareholders (usually less than 50) and on the transferability of shares.
  
  Shareholders form a close corporation when they want to operate the business according to an agreement that details the management structure upfront and prevents them from selling or giving away their interests except in accordance with the agreement.
  
  A close corporation must follow the same laws regarding corporate names as any corporation.
  
  

Law

• Every state builds name requirements for corporations into its business laws to prevent registration of a corporation unless its name is unique and easily distinguishable from that of any other business operating in the state. The laws also require that a corporation be distinguishable as a separate legal entity by appending "incorporated," "corporation," "company," "limited," or an abbreviation.
  
  

Rationale

• A corporation's name must be distinguishable from the names of other businesses, to prevent confusion and to protect their intellectual property and goodwill.