Question

Acme Partnership has three individual partners. The partnership itself owns, pays for, and is beneficiary of the life policies that insure the lives of the individual partners. This type of arrangement is called a?

A) partnership purchase plan.
B) key person buy-sell plan.
C) partnership entity buy-sell plan.
D) partnership cross-purchase plan.

Answer 1

A partnership entity buy-sell plan is an arrangement where a partnership owns life insurance policies on individual partners and is also the beneficiary, used to manage ownership transitions.

Step-by-step explanation:

The arrangement where a partnership owns policies insuring the lives of individual partners, with the partnership being both the policy owner and beneficiary, is known as a partnership entity buy-sell plan. This type of plan is commonly used in business arrangements such as general partnerships, where multiple individuals share responsibilities and profits.

It is especially important in managing the transition of ownership and responsibilities in case of a partner's death, maintaining business stability despite the inherent challenges of a partnership structure, such as shared liabilities and the potential for business dissolution upon a partner's departure.