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. Small Business

    How To Create A Business Succession Plan

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

    Using Insurance in a Business Succession Plan

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

    Buy-Sell Agreements: What Advisors Should Know

    Having a buy-sell agreement in place can cement a succession plan with a fair price and ensure a seamless transition to the new owner.
  4. 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.
  5. 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.
  6. Small Business

    Should You Have A Business Partner?

    What are the advantages of having a business partner? What are the advantages of doing it yourself?
  7. Small Business

    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.
  8. Investing

    The Benefits And Pitfalls Of Joint Tenancy

    This arrangement allows beneficiaries to access your account without having to go to court.
  9. 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?
  10. Taxes

    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.
RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. 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 >>
Hot Definitions
  1. Benchmark

    A standard against which the performance of a security, mutual fund or investment manager can be measured.
  2. Mobile Wallet

    Mobile wallet is a virtual wallet that stores payment card information on a mobile device.
  3. Leverage

    1. The use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment. ...
  4. Trumponomics

    Trumponomics is a term for the economic policies of President Donald Trump.
  5. Universal Health Care Coverage

    An organized healthcare system that provides healthcare benefits to all persons in a specified region. Many countries, such ...
  6. Davos World Economic Forum

    The annual meeting of the World Economic Forum hosted at Davos—a small ski town in Switzerland—in January each year is among ...
Trading Center