Corporation Stock Purchase Plan
Same as term Close Corporation Plan: prior arrangement for surviving stockholders to purchase shares of a deceased stockholder according to a predetermined formula for setting the value of the corporation. Often, the best source for its funding is a life insurance policy in either of these forms: (1) Individual Stock Purchase Plan (Cross Purchase Plan), much like the partnership cross purchase plan. Each stockholder buys, owns, and pays the premium for insurance equal to his/her share of the agreed purchase price for the stock of the other stockholders. (2) Corporation Stock Purchase Plan (Stock Redemption Plan), similar to the partnership entity plan is a better choice if the number of stockholders is large. The corporation purchases and pays the premiums on the amount of insurance needed to purchase the decreased stockholder's interest at the price set by the predetermined formula. These premiums are not tax deductible as a business expense, but the death benefits are not subject to income tax. Life insurance owned by the corporation is listed as an asset on the corporation's balance sheet. Ownership of life insurance on the stockholders thus increases the corporation's net worth, and if permanent insurance is purchased, its cash value would be available for loans in the event of business emergencies.
Popular Insurance Terms
Process in life insurance by which an applicant who is uninsurable, or is a greater than average risk, seeks to obtain a policy from a company at a standard premium rate. Life insurance ...
Program designed as protection for political risk (action taken by a foreign government resulting in financial loss to companies trading or investing overseas). Coverage is provided for ...
Goals of the financial planning process as follows: Standard of Living Maslow's basic needs satisfied such as food, water, clothing, shelter, and nice-to-have discretionary items, such as ...
Automatically extended reporting period of 60 days, during which claims may be made after a claims made basis liability coverage policy has expired. ...
Basis for calculating life insurance premiums and benefits using current interest and mortality rates, rather than historic rates. Current assumptions are critical to interest-sensitive ...
Recording and presentation of financial statements, such as the annual statement, by the insurance company. Financial reporting statements are used by the State Insurance Commissioner in ...
Organization following the format of Lloyd's of London. ...
Refers to the insured or reinsured paying premiums into an account at a commercial bank that will be used to pay for future or past losses. Portions of the premiums not required to pay for ...
Major credit insurer of the early 20th century that merged into the London Guarantee and Accident Co. in 1931. ...
Have a question or comment?
We're here to help.