What is the primary purpose of buy-sell plans?

The primary purpose of buy-sell plans is to ensure the continuity and financial stability of a business when a key owner passes away or becomes incapacitated. These plans facilitate the transfer of ownership shares back to the remaining business partners or the business itself, thereby providing a clear path for ownership transition. This arrangement helps maintain the operational integrity of the business and reduces the potential disruption that can occur with the sudden loss of a key owner. Through a buy-sell agreement, the remaining owners can effectively manage ownership changes, ensuring that they maintain control over who owns part of the business. This is crucial for preserving the company's value and providing assurance that the business can continue to operate smoothly in the owner’s absence.

Other options, while relevant to various aspects of business and financial planning, do not specifically capture the primary objective of buy-sell plans, which is fundamentally about ownership continuity rather than tax reduction, employee profit-sharing, or worker’s compensation.