Entity Plan
Updated: 29 October 2024
What Does Entity Plan Mean?
An entity plan is a business succession strategy designed for companies with multiple owners. It involves the surviving partners purchasing the shares of a deceased partner. An entity plan is only enforceable if all partners have agreed to it in a contract before it is implemented.
Insuranceopedia Explains Entity Plan
Succession planning is typically undertaken by business partners even before the company is launched to ensure a smooth transition if one of the co-owners passes away.
Under an entity plan, the company purchases the shares from the estate of the deceased partner. These shares are funded by the proceeds of a life insurance policy that the business has specifically acquired for this purpose.
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