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
Length of time insurance policy is in force. ...
Classification of insured life and health risks based on the sex of the proposed insured. Gender has long been one of many factors in classifying, accepting, and rating risks. For example, ...
Coverage for all personal property, regardless of location of an insured and household residents, including children away at school. Written on an all risks basis, subject to excluded ...
Excess or deficit of gross premium above the pure cost of insurance and expenses. The result becomes the valuation of the asset share of the policyholder at the end of a given year. The ...
Method of terminating a split dollar life insurance policy in which the company transfers its interest in the life insurance policy to the insured employee. Through such a transfer, the ...
Same as term Original Age: insured's age at the date a term life insurance policy is issued. An original age or retroactive conversion option permits the insured to convert the term policy ...
difference between the face value of a permanent life insurance policy and its accrued cash value. The pure cost of protection is based on this difference. For example, if the face value ...
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 ...
Named peril policy is how it’s called in the Real Estate Industry the insurance policies that specify the perils it covers. Under a named peril policy, if anything that isn’t ...
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