Entity Plan

What Does Entity Plan Mean?

An entity plan is business succession plan for companies with more than one owner. It involves the surviving partners buying the shares of the deceased partner. An entity plan is only enforceable if all partners have agreed to this in contract before it is acted upon.

Insuranceopedia Explains Entity Plan

Succession planning is usually undertaken by business partners even before the company is launched to ensure that the transition is smooth should one of the co-owners die.

Under an entity plan, the company buys the shares from the estate of the deceased. These shares are paid from the proceeds of a life insurance policy the business has bought specifically to handle this event.