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
Coverage for the employer in the event of a tort committed by an employee in the use of his or her own car while conducting business on behalf of the employer. ...
Frequency and severity of accidents resulting from conditions and environment surrounding one's workplace. Occupation is an important underwriting factor when considering an applicant for ...
Financial analysis method established by the national association of insurance commissioners (naic) to detect problems of property and casualty insurance companies and life and health ...
Coverage in which an initial premium is charged, with the stipulation that an additional premium can be charged later if the loss experience of the insurance company warrants it; that is, ...
Workers' premiums in a contributory employee benefit plan. ...
Requirement that the combination of medicare and the employer's plan can not be greater than the amount the employer's plan would pay without Medicare. ...
Plans that are similar to stock appreciation rights (SARS) in that an employee is granted a contractual right by the employer to a stipulated number of units in the business, which is ...
Coverage for bodily injury and/or death resulting from accidental means (other than natural causes). For example, an insured is critically injured in an accident. Accident insurance can ...
Agreement concerning an insured individual, not the insured's property. A property and casualty insurance contract cannot be assigned, since it follows the insured, not the property. For ...
Have a question or comment?
We're here to help.