The instructions to Form 9089 state that "Closely Held Corporations are corporations that have relatively few shareholdersrs and whose shares are not generally traded in the securities market."
The question that appears on Form 9089 is whether the employer is a closely held corporation, partnership or sole proprietorship in which the alien has an ownership interest.The Employer is required to respond 'Yes" or "No."
A "Yes" answer raises the inference (or presumption) that the Employer may not have a bona fide job offer for a U.S. worker but prefers to place an insider in the position. The DOL will certainly tag such an application for an audit and inquire into the Employer's relationship to the alien who has an ownership interest.
The May 6, 2002, publication of the proposed PERM rule stated that if the Employer is a closely held corporation or partnership in which the alien has an ownership interest, or if there is a familial relationship between the stockholders, corporate officers, incorporators, or partners, and the aline, the employer in the even of an audit must provide the following documentation: (1) A copy of the articles of incorporation, (2) A list of all corporate officers and shareholders of the corporation, their titles and positions in the corporate structure, and a description of their relationship to each other and to the alien beneficiary; (3) The financial history of the corporation, including the total investment in the corporation and the amount of investment of each corporate officer, incorporator and the alien beneficiary; and (4) the name of the corporate official with primary responsibility for interviewing and hiring applicants for positions within the
organization and the name(s) of the corporate official(s) having control or influence over hiring decisions involving the position for which labor certification is sought.
The final rule simply states that Closely Held Corporations are those that have few shareholders and whose shares are not generally traded in the securities market.
Recently I received an inquiry from an Employer who had answered "No" to the question, based on his understanding of the term "Closely Held Corporation." He stated that the alien owned only 15% of the company and that there were about 10 shareholders.
I advised him that he should obtain an opinion from a corporate lawyer whether his company was closely held or not. While there is some lack of precision in the definition, an incorrect answer could bring charges of fraud or misrepresentation.
The answer would seem to turn on how many shareholders are "few" and an interpretation of the phrase "not generally traded in the securities market."
One internet site specializing in taxes states that the corporation is closely held if it has five or less shareholders and that if one of the shareholders wants to sell some or all of his/her shares, the sale must take place with one of the other existing shareholders, since no sale of shares can take place.
Employers should obviously obtain a legal opinion before answering "No" to this question and keep the legal opinion in their PERM Record File.