What distinguishes an open corporation from a close corporation?

An open corporation is characterized by its ability to sell its stocks publicly, allowing it to access a wider range of investors and capital. This means that the shares of an open corporation can be traded on public stock exchanges, facilitating liquidity for shareholders and enabling the corporation to raise funds more easily through the sale of stock. This public trading aspect fundamentally differentiates an open corporation from a close corporation.

In contrast, a close corporation does not offer its shares to the general public and typically has restrictions on the transfer of shares. Close corporations are often held by a small number of individuals, leading to a more private nature in their operations and management. This restriction on the ability to sell and transfer shares is a defining characteristic, but it is not what distinguishes it as an open corporation.

Understanding these distinctions highlights the fundamental operational and financial approaches of each type of corporation in regards to ownership and investment strategies.