Definition of closely held corporation

firm that has only a few stockholders. It contrasts with a privately held corporation in that a closely held corporation is public although few of the shares are traded. The socalled "corporate pocket-books" may become subject to the additional personal holding company tax on income not distributed. For example, deductions and losses in transactions between a major stockholder and the corporation may be disallowed under certain circumstances.

1. one that is publicly traded although it has few stockholders. It is distinguished from privately held or closed corporations, which are not publicly traded.
2. in taxation, one in which five or fewer individuals own 50% or more of the outstanding stock during the last half of the year.