Dictionary / Close Corporation
What does Close Corporation mean in accounting?
Quick definition
Tax & complianceA corporation with a comparatively small number of stockholders, all of whom participate in the conduct of its affairs. This term guides how bookkeepers record, classify, and explain related transactions in routine financial reporting.
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Examples
Three owners, all on the floor
You incorporate a millwork shop on March 12. You and two co-owners each take 200 shares of common stock and each work the shop: you estimate, one co-owner runs the CNC, the other installs. That is a close corporation: a corporation with a small number of stockholders, all of whom participate in its affairs. Debit Checking $18,000 and credit capital stock $18,000 for the three $6,000 deposits. Put all three on payroll, file the certificate of incorporation with the entity papers, and do not add a Close Corporation account in QuickBooks Online.
Close is not closing the books
You run a catering company as an S-corp with you and two kitchen leads as the only stockholders, and all three work events. On January 8 your CPA asks whether it is a close corporation so they can write owner-comp notes, and your bookkeeper replies that December is already closed because closing entries moved $2,100 of net income to retained earnings. That is the wrong close: answer yes, because a close corporation is who owns and runs the corporation, not a period-end close and not a shutdown. Leave capital stock alone, and do not mark the company inactive in QuickBooks Online.
Why it matters
A close corporation is a corporation with a small group of stockholders, and every one of them helps run the business. You need the word because lenders, CPAs, and state forms will ask whether owners are all active, and because owner pay and equity look different when nobody sits on the sidelines. You will not post this most months; it comes up when you incorporate, add or drop an owner, or a packet asks who participates. Mix it with month-end closing of the books, with dissolving the entity, or with a certificate of incorporation, and you will treat an ownership type as closing entries, a shutdown, or a formation paper.
Keep learning
Start with the bookkeeping basics, then compare software when you are ready to pick a tool.
Getting startedBookkeeping basics for small-business ownersWhat bookkeeping is, the records you need, double-entry in plain English, and a monthly rhythm that fits a 1–50 person shop.Updated October 4, 2026
RolesWhat does a bookkeeper do?A bookkeeper records bills, invoices, and bank activity so your books stay current. See the weekly work, the month-end close, and what they do not do.Updated August 18, 2026
Monthly closeMonthly bookkeeping: what to close each monthMonth-end is the job: reconcile banks and cards, age bills and invoices, check payroll, then read the reports. A close checklist for small-business owners.Updated August 18, 2026
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What is Close Corporation in bookkeeping?
A corporation with a comparatively small number of stockholders, all of whom participate in the conduct of its affairs.
When should I use Close Corporation?
Use Close Corporation when the transaction facts match its definition and you need the ledger and financial statements to reflect the correct account and period.
What is a common mistake with Close Corporation?
Close Corporation is used for close corporation entries, while C&F covers a related but distinct bookkeeping purpose. Review both terms before posting unusual transactions. A common mistake is applying it by label only instead of checking the underlying transaction details.