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
Risk that premiums and reinsurance, as well as other receivable instruments, will not be collected. ...
Those states requiring insurers to obtain prior approval rating of rates and policy forms before they use them. Although most states once fell into this category, many followed the lead of ...
Form that covers exposures associated with efforts to operate a business that is damaged by a peril such as fire. For example, a special electrical generator may have to be purchased in the ...
One of four SEC divisions charged with regulating investment companies, investment advisers, and variable insurance products. The SEC requires variable insurance products to register with ...
Charging the insured an amount that is above the actual premium required for placing and maintaining the policy in force. ...
Provision in most property insurance policies that permits a policyholder to use the insured premises to store materials and handle them in the manner needed to pursue his or her line of ...
Purchasing bond investments that mature at different time intervals. ...
Addition to a business property insurance policy to cover loss of earnings, subject to a monthly limit, in the event that property of an insured is destroyed and a business cannot continue. ...
Coverage for a lender who has accepted property on the floor of a merchant as security for a loan. If the merchandise is damaged or destroyed, the lender is indemnified. The policy is on an ...
Have a question or comment?
We're here to help.