The business may deduct the premium payment as compensation paid to the insured owner, and the owner must declare that as compensation on his income tax return. Generally, life insurance proceeds are received free of income tax. The deceased owner's estate is responsible for any estate tax. Not directly, but perhaps indirectly. Ohio exempts life insurance proceeds from estate tax unless the estate, itself, is the designated beneficiary.
Federal rules are more complicated.
So long as the business owns the policy and is the designated beneficiary, the life insurance proceeds will not be included in your estate. The deceased owner's one-third interest in this case also has increased. Estate taxes are based on the value of assets owned by the deceased. As the value of those assets increase, so do the estate taxes. Values of certain assets, such as business interests, may be predetermined through the use of agreements between the owners.