What is a Close Corporation Plan?
Close corporation plans are pre-arranged agreements that make it possible for surviving stockholders to purchase the outstanding shares of a deceased shareholder. In most cases, the agreement will provide the steps necessary to make the purchase, including a formula for determining the number of shares that may be acquired by each of the surviving shareholders. This provision helps to ensure that a balance of shares among the shareholders remains constant. It is not unusual for shareholders who wish to set up a close corporation plan to accomplish the task with the establishment of a life insurance policy. There are two basic types of policies that may be created to aid in the process of the close corporation plan. The individual stock purchase plan involves each stockholder paying a portion of the premium that is considered to be representative of the total number of shares held by each individual shareholder. This plan tends to work very well if the number of shareholders is relative
