Does Texas still have close corporations?

Yes. The statutory close corporation election survives in Subchapter O of Chapter 21 of the Business Organizations Code. It requires a “this corporation is a close corporation” statement in the certificate of formation, but it is rarely elected today because Section 21.101 shareholders’ agreements deliver similar flexibility without the election.

Is a close corporation the same as a closely held corporation?

Functionally, yes in everyday usage — both describe a corporation with few shareholders and no public market. Strictly, “close corporation” in Texas can also mean the formal statutory election, which is a narrower category.

Can a close corporation make an S election?

Yes, if it meets the federal requirements: no more than 100 shareholders, one class of stock, and only eligible shareholders (generally U.S. individuals and certain trusts and estates). Most close corporations fit comfortably.

Should my small business be a close corporation or an LLC?

For most Texas small businesses, the LLC wins: same liability protection, simpler governance, pass-through taxation by default. Choose a corporation when investors, QSBS, or a planned stock sale demand it — and pair it with a strong shareholders’ agreement. Choosing between an LLC, a corporation, and a shareholders’ agreement structure is a one-time decision that’s expensive to unwind later. Reidel Law Firm advises Texas business owners on entity selection, formation, and shareholder agreements for transparent flat fees — no hourly surprises. Talk to a Texas business attorney before you file your certificate of formation.

TEXAS BUSINESS LAW

What Is a Close Corporation? Texas Rules Explained

Schuyler 'Rocky' Reidel April 14, 2015 6 min read

A close corporation is a corporation owned by a small group of shareholders — usually people who also run the business — whose shares are never publicly traded and are typically locked down by transfer restrictions. Texas still recognizes a formal statutory close corporation election<