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. Shotgun Clause

    A buy-sell provision used by related parties in a business venture ...
Related Articles
  1. Entrepreneurship

    How To Create A Business Succession Plan

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

    Structure and Tax Considerations of Buy-Sell Agreements

    Structure and Tax Considerations of Buy-Sell Agreements
  3. Professionals

    Business Uses of Life Insurance

    Business Uses of Life Insurance
  4. Wealth Management

    Using Insurance in a Business Succession Plan

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

    Buy-Sell Agreements

    Buy-Sell Agreements
  6. Professionals

    Corporate Stock Redemption

    Corporate Stock Redemption
  7. 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.
  8. Entrepreneurship

    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.
  9. Professionals

    Stock Plans

    Stock Plans
  10. Professionals

    Types Of Businesses

    This section includes exam topics regarding various types of business entities and their filing requirements.
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 >>
  4. 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 >>
  5. How are business decisions made in a partnership?

    Understand how partners in a business can tackle decision making, and learn the options available for partnerships to develop ... Read Answer >>
  6. In what context is a corporation considered to be an individual entity?

    Read about when a corporation is considered an individual entity, when it is not and why corporations are not considered ... Read Answer >>
Hot Definitions
  1. Return On Invested Capital - ROIC

    A calculation used to assess a company's efficiency at allocating the capital under its control to profitable investments. ...
  2. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  3. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  4. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  5. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  6. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
Trading Center