Final answer:
An entity buy-sell plan is a life insurance arrangement where a partnership is the policy owner and beneficiary, enabling the continuity of the partnership after a partner's death. It differs from Keough plans, stock redemption plans, and cross purchase plans, which serve different purposes.
Step-by-step explanation:
When a partnership owns, pays for, and is the beneficiary of life insurance policies on the lives of its individual partners, this arrangement is known as an entity buy-sell plan. This type of arrangement ensures that the partnership can continue operating in the event of a partner's death by using the proceeds from the life insurance to buy out the deceased partner's interest in the business.
These plans are critical for business continuity and can help protect both the business operations and the partners' financial interests. In contrast, a Keough plan is a retirement plan for self-employed individuals and their employees, a stock redemption plan involves a company buying back its own stock, and a cross purchase plan is where each partner buys a policy on the other partners.