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.

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.