Entity Plan

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. Because the policy may need to stay in force for many years before a buyout is triggered, owners typically compare the best life insurance companies to find one with reliable underwriting and predictable premiums. Entity plans are usually one piece of a broader business insurance program that also covers things like liability and property.