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Privately held corporations: understanding the basics

The right to choose the type of incorporation process of privately held corporations is usually given to the corporation itself or its managers and board of directors. Texas law provides various forms of internal business models that may be incorporated in order to run the company on a daily basis.

Many companies consult professional legal help in order to facilitate incorporation of privately held corporations. In the past, many privately held corporations were criticized for the way in which they executed manager-run policies. The corporations used to allegedly make policies that benefited the managers of the company and were detrimental to the shareholders, especially the minority shareholders.

With the passage of time and the growing advocacy of shareholders' rights, Texas courts have more recently also set precedents to benefit the shareholders. Thus, in the recent past, it has been observed by financial experts that the policies of most privately held corporations are more moderate and they benefit all parties involved.

While most privately held corporations in Texas tend to be small firms, there are various large and extremely large corporations that are still privately held. One of the major reasons for such large corporations not to go public is so that they can retain control over the daily decisions of the company. A second major motivating factor for many corporations keeping things private is the substantially smaller amount of paperwork that is required during the incorporation process.

The backbone of the American economy is the privately held corporation. Those corporations may be family businesses or small partnership firms. Thus, privately held corporations in the state are not only significant when they become large corporations, but they have a significant economic impact irrespective of their size.

Source: UTexas.edu, "The incorporation choices of privately held companies," Accessed on Jan. 22, 2015

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