Business Uses

Betty and Jack have a partnership. If their partnership is worth $800,000 how much life insurance is issued on each partner if a cross-purchase plan is used?

$400,000

Julian Grocery stores has locations in all 50 states. It is a privately-held corporation. What business continuation agreement does Julian Grocery stores most likely have?

Close corporation stock redemption plan

What business continuation plan should Flo and Joann purchase for their business partnership?

Cross-purchase plan

Which of the following business continuation agreements is most appropriate for Teri and Annette's business partnership? Select one: a. Entity plan b. Cross-purchase plan c. Stock redemption plan d. Key person

Cross-purchase plan

Three partners use a buy-sell agreement to assure the business ownership will be properly transferred upon the death of one or more partners. If a cross-purchase plan is used as the business continuation agreement, how many policies will be issued?

Each partner buys a policy on each of the other partners. (Each partner purchases 2 policies; 2 policies _ 3 partners = total of 6 policies.) The correct answer is: 6

A furniture company is owned by five partners. What business continuation plan would you suggest to the company?

Entity plan

Four partners share in the ownership of a bowling alley. Which of the following business continuation plans best fits their needs?

Entity plan

Which of the following business continuation plans is best for a partnership with 6 partners?

Entity plan

Mary's Cosmetics purchases a life insurance policy on Samantha, the leading makeup salesperson in the nation. Which business continuation plan did Mary's Cosmetics buy?

Key person insurance

Which of the following is most true regarding a split-dollar plan?

Premiums and benefits are split between the employer and the employee.

A plan that allows a deceased stockholder's heirs to retain ownership while a portion of the deceased stockholder's shares are redeemed by the corporation is a:

Section 303 plan

Which business continuation plan permits a deceased shareholder's heirs to maintain some ownership while the corporation redeems a portion of the deceased shareholder's shares?

Section 303 plan

Which of the following best describes a business continuation plan intended for a corporation in which the corporation purchases a portion of the deceased stockholder's shares?

Section 303 plan

With a ___________ plan, a deceased stockholder's heirs can retain control over the portion of business owned.

Section 303 plan

All of the following are buy-sell agreements, EXCEPT: Select one: a. Stock redemption plan b. Cross-purchase plan c. Entity plan d. Split-dollar plan

Split-dollar plan

What business continuation agreement would you recommend to a corporation with 3 shareholders so that when a shareholder dies, all other shareholders agree to purchase a portion of the deceased shareholder's stock at an agreed price?

Stock purchase plan

Which business continuation plan would permit ABC Corporation to redeem a portion of the deceased shareholder's shares without relinquishing the corporation's ownership?

Stock redemption plan

All of the following are true regarding executive bonus plans, EXCEPT: Select one: a. An employer gives an employee a bonus in the amount of the premium payments on a life insurance policy. b. The employee is the insured and the company is the owner of the policy. c. The employer pays the premiums, but receives a tax deduction in the amount of the premium because it is treated as a pay raise. d. The employee pays income tax on the amount of the pay raise, however the company may _bonus_ the amount of the income taxes.

The employee is the insured and the company is the owner of the policy.

All of the following statements regarding key person insurance are true, EXCEPT: Select one: a. A business that purchases life insurance on a key employee has purchased key person insurance. b. Key person insurance is intended to offset the loss to a business when a top-selling salesperson, manager or employee dies. c. The key employee is the policyowner and pays the premiums; the company is the beneficiary. d. Premiums are not tax-deductible, but the death benefit is received tax-free.

The key employee is the policyowner and pays the premiums; the company is the beneficiary.

What is business life insurance used for? Select one: a. An employee benefit b. A funding tool c. Business interruption insurance d. All of the above

all of the above