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
Pension plan format. After deciding how much to contribute, the employer can suspend, reduce, or discontinue contributions during the first 10 years only for reasons of business necessity; ...
Vehicle for the deferring of unneeded current income for a later date, such as retirement, providing the following benefits: There is no tax on earnings of the plan until distributed; ...
Transit over land. ...
Coverage on an all risks basis for loss due to theft or mysterious disappearance of personal property; damage to premises and property within resulting from theft; and vandalism and ...
List and description of valuables, to be utilized in the event an insurance claim must be filed. Included should be: a detailed explanation of possessions that are of special value, such as ...
Plan under which an employee authorizes his or her employer to deduct from each paycheck premiums due on an insurance plan. ...
Annuity contract. If the annuitant dies before receiving income at least equal to the premiums paid, a beneficiary receives the difference in installments. If the annuitant lives after the ...
interconnection of computers that contain pages classified into groups called web sites that can be accessed over the internet. The only requirement for visiting a web site is to have ...
Method of calculating the primary insurance amount (PIA) for Social Security benefits. Employees' covered monthly earnings are adjusted to reflect changes in the national average annual ...
Have a question or comment?
We're here to help.