Close Corporation Plan

DEFINITION of 'Close Corporation Plan'

A form of business buy-sell agreement. Close Corporation Plans stipulate that the surviving partners must purchase all of the shares owned by the deceased partner or owner. The plan outlines the method of funding as well as the price at which the shares must be purchased.

BREAKING DOWN 'Close Corporation Plan'

Close Corporation Plans are usually funded with life insurance policies. They usually take one of two basic forms. One is a cross-purchase agreement, where each partner owns a policy on all of the others, and the other is known as an stock redemption plan, where the corporation owns a single policy on each stockholder.

RELATED TERMS
  1. Cross-Purchase Agreement

    A document that allows a company's partners or other shareholders ...
  2. Buy And Sell Agreement

    An approach used by sole proprietorships, partnerships and closed ...
  3. Succession Planning

    A strategy for passing each key leadership role within a company ...
  4. Entity-Purchase Agreement

    A type of business succession plan that is used by companies ...
  5. General Partner

    Owners of a partnership who have unlimited liability. A general ...
  6. Limited Partner

    A partner in a partnership whose liability is limited to the ...
Related Articles
  1. Financial Advisor

    How To Create A Business Succession Plan

    Make sure the business you built continues to thrive long after you've left the helm.
  2. Retirement

    Using Insurance in a Business Succession Plan

    How to use life and disability insurance to help fund a business succession or buyout plan.
  3. Investing

    What is Carried Interest?

    Carried interest is the percentage of a private equity or a hedge fund’s profits that its general partners receive as compensation.
  4. Entrepreneurship & Small Business

    Which Type of Organization Is Best For Your Business?

    Learn the differences between the types of business organizations so you can determine how to best structure your business for tax and liability limitations.
  5. Retirement

    Why You Shouldn't Let Your Partner Do The Books

    One person often deals with the finances in a relationship, but being ignorant has a cost.
  6. Personal Finance

    The Benefits And Pitfalls Of Joint Tenancy

    This arrangement allows beneficiaries to access your account without having to go to court.
  7. Retirement

    Why Own Life Insurance in a Qualified Retirement Plan?

    What are the pros and cons of owning cash value life insurance in a qualified retirement plan?
  8. Personal Finance

    What's the Purpose of IRS Form 1065?

    Business partners need the information on this form to complete their own tax returns. Here are the details.
  9. Retirement

    Teaching Your Partner About Household Finances

    This is just one more way to take care of one of the most important people in your life.
  10. Managing Wealth

    3 Questions To Find Your Trading Plan

    Ask yourself these three questions to figure out which strategy is best for you.
RELATED FAQS
  1. What changes should be made to our life insurance coverage?

    We began as a small company where the two founders purchased $1M in life insurance on each other. This... Read Answer >>
  2. How are the profits split between a general partner and a limited partner in a real ...

  3. Can I buy insurance to reduce unlimited liability in a partnership?

    Find out why it is important to safeguard your general partnership in the even that one member becomes disabled, dismembered ... Read Answer >>
  4. Which terms should be included in a partnership agreement?

    Understand what specific terms should be included in a business partnership agreement and how each affects the partners in ... Read Answer >>
  5. What is the difference between a silent partner and a general partner?

    Understand the difference between a person designated as a silent partner and a general partner under the partnership business ... Read Answer >>
  6. What's the difference between limited liability partnership and general partnership?

    Learn the differences between general partnerships and limited liability partnerships; each type has unique traits, benefits ... Read Answer >>
Trading Center