Finding Accountants for Closely Held Companies

Closely held companies aren’t like other businesses.

They have different strengths (such as greater control for managers) as well as different challenges (less liquidity for shareholders).

Many are owned and operated by families, with shareholders doubling as managers and company leaders. And the perspective of stakeholders is more intimate and emotional than that of typical investors at larger, publicly owned businesses.

From the way they are taxed to the rules that govern how they exchange their shares, nearly everything about these businesses is different.

And so, it’s no surprise that it takes a different type of accounting firm to help these corporations – and those who own them – achieve their goals.

So, what is it that makes these businesses special? What are their strengths and weaknesses? And if you are the owner or representative of a closely held corporation, how do you find the right accounting firms in DuPage County, Illinois for your business?

What is a closely held company?

A closely held company or corporation is simply a publicly listed business owned by a small group of people. The definition varies depending on the government institution and type of law. However, for tax purposes, the IRS considers a company closely held if 50% or more of its stock is owned by up to five individuals at any point in the last six months of a tax year.

Closely held corporations are often small or mid-sized, but not always; famous counterpoints include Hobby Lobby and Chick-fil-A. And while they are often owned by families, not all small or mid-sized family businesses are considered closely held.

They can also have a variety of different business classes. That includes C Corporation, in which the corporation is responsible for profits and losses; or S Corporation, in which profits and losses are passed through to the owners. However, businesses in the personal services sector, such as law firms or engineering firms in which the employees may own the business, are not permitted to be closely held corporations (by the IRS, anyway).

Closely held companies come in a variety of shapes and sizes. But what makes them unique is that the majority of these businesses is owned and directly controlled by a small group of people, who are often (though not always) members of the same family.

It’s easy to see how this opens the door for a number of unique challenges and opportunities.


With a small group of shareholders in control of the business, closely held companies have a unique set of strengths, such as:

Greater control of operations: In a closely held corporation, management doesn’t have to answer to a large group of outside shareholders. They are the majority shareholders; therefore, they can run their company the way they want to run it. They don’t have to answer to the short-term desires of outside investors; instead, they can make decisions for the long-term benefit of the organization.

Less risk of a hostile takeover: A takeover requires a third party to acquire a controlling interest of a business’ equity. By definition, 50% or more of a closely held company’s shares are in the hands of a small, often tight-knit group. Therefore, it’s unlikely a third party will be able to acquire enough equity to seize control.

Simplified taxes: If the company is an S corporation, its income may be passed through to shareholders, who can file their income and losses directly with the IRS. In some situations, the corporation doesn’t need to file at all.


Some of the challenges faced by closely held companies include:

Personal issues: When the small group of shareholders are aligned in their goals and values, closely held corporations can thrive due to their lack of red tape and bureaucratic oversight. However, when there is any disharmony – a divorce, for instance, or a clash of personalities between one generation and the next – a small, emotionally intimate group at the helm can be a liability for a corporation.

Liquidity: The shares of closely held companies cannot easily be sold, due to both a lack of a market and restrictions that may be placed on the transfer of the corporation’s shares. Transferring stocks to cash can be difficult.

Raising capital: Because their shares aren’t listed on the public stock exchange, investors cannot easily step in and inject capital into the company, which can make it difficult to expand the business and invest in new assets.

Valuations: Closely held companies don’t have an open market to determine the value of their shares. This can make it hard to evaluate shares when they must be transferred, such as in an estate or gift tax situation.

Finding accountants for closely held companies in Chicago, IL

As a leading accounting firm in Chicago’s suburbs, Dugan & Lopatka specializes in serving mid-sized, privately held companies and family businesses.

We understand the importance of achieving both your business and personal goals. That’s why we combine services like cash flow projections, strategic planning, advisory services and business valuation with personal finance services such as estate planning, succession planning, and individual tax preparation. Our accountants in Chicago’s suburbs will help you and your family coordinate your financial goals and achieve success in business and in life.

Looking for an accountant for a closely held business in Chicago or the Chicago area? Meet the CPAs of Dugan & Lopatka and learn more about our firm here.

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