Buy-and-sell Agreement
Definition of "Buy-and-sell agreement"
Approach used for sole proprietorships, partnerships, and close corporations in which the business interests of a deceased or disabled proprietor, partner, or shareholder are sold according to a predetermined formula to the remaining members) of the business. For example, a partnership has three principals. Upon the death of one, the two survivors have agreed to purchase, and the deceased partner's estate has agreed to sell, the interest of that partner according to a predetermined formula for valuing the partnership to the survivors. Funds for buying out the deceased partner's interest are usually provided by life insurance policies, with each partner purchasing a policy on the other partners. Each is the owner and beneficiary of the policies purchased on the other partners. When a sole proprietor dies, usually a key employee is the buyer/successor. The sole proprietorship, partnership, and close corporation under the entity plan can buy and own life insurance policies on the proprietor, partner, or shareholder and achieve the same result as when an individual buys and owns the policies.
Popular Insurance Terms
Actuarial equivalent method of calculating the premium rate through the development of the following equation: probability that the event insured against occurs x face amount of policy x ...
Latin for "Let the superior reply." That is, an employer is liable for the torts of employees that result from their employment. For example, an insurance company (the master) acts through ...
Excess coverage over the first layer of medical insurance to provide for catastrophic medical payments. The first layer may be either group or individual medical insurance, or an individual ...
Act that provides retroactive liability for environmental claims by mandating that those who polluted the environment must pay to clean up the pollution, regardless of how long ago their ...
Base upon which a mortality table is built by beginning with a randomly selected group of people who are alive at the earliest age for which statistics are available on the number of people ...
Means of paying the cost of benefits of pension plan participants including retirement, death, and disability. ...
Insurance policy underwritten and issued by a syndicate listing each risk insured by each syndicate member. ...
Legislation providing that, to the extent that all deductible medical care expenses exceed 7.5% of the taxpayer's adjusted gross income (AGI), expenses not reimbursed under qualified ...
Initial premiums on all insurance policies in force (those policies that have not been cancelled or expired). ...
Have a question or comment?
We're here to help.