All of the following are examples of a Business Continuation Plan EXCEPT

• A. Buy-sell funding through life insurance
• B. Key employee insurance
• C. Deferred compensation
• D. Purchase agreement funding

Answer: (C)

Deferred compensation is not a tool used to keep a business operating smoothly after an owner leaves or dies. A business continuation plan focuses on arrangements that ensure there is liquidity to transfer ownership and keep operations going, such as funding a buy-sell agreement or securing funds to replace a key owner or employee. Buy-sell funding through life insurance provides the cash to purchase an owner’s interest when necessary. Key employee insurance protects the business by funding the cost of replacing a crucial person, preserving continuity. Purchase agreement funding is the mechanism that fuels the buy-sell agreement itself, ensuring the transfer can happen without financial burden on the business. Deferred compensation, on the other hand, is primarily a compensation-arrangement used to retain and reward executives, not a direct method for funding or arranging business continuation. That’s why it’s the exception.