What type of agreement is often made between stockholders in small, privately held corporations regarding life policies?

In small, privately held corporations, stockholders often engage in buy/sell agreements concerning life insurance policies. These agreements establish a plan for the ownership of shares following a triggering event, such as the death of a shareholder.

When a shareholder passes away, the buy/sell agreement stipulates that the remaining shareholders will purchase the deceased's shares, usually funded by life insurance policies taken out on each shareholder. This arrangement provides liquidity to the deceased’s family and ensures that the remaining shareholders can maintain control of the business without outside interference.

While partnership agreements and shareholder agreements are related concepts that dictate various aspects of business operations and obligations among members, they do not specifically focus on the life insurance aspect as a buy/sell agreement does. Stock option agreements typically relate to granting employees the right to purchase stock, rather than addressing the ownership transition of shares upon a shareholder's death. Thus, the buy/sell agreement is the most appropriate choice in the context of life insurance policies and ownership transitions in a business setting.