What Do You Need To Do If Your Business Partner Dies?
A successful business depends on good planning. Planning unexpected as much as predicted is exactly what ambitious businesses must be doing. If you are here for a long run think of what would you be doing if your business partner passed away? By protecting your business from the unexpected you look after your investors, suppliers, partners, customers and employees therefore it is a must to understand what to do when it happens.
If your business partner suddenly died tonight, the remaining survivors have couple of options:
1. You could liquidate the business. Rub your hands and walk away sort of approach. Of course it is an extreme and most likely unwanted ending of the disaster planting many legal and organisational difficulties.
2. Follow the directions of the deceased’s will which will either pass the shares to their family members or a business heir.
3. If the will was processed with you can always buy the shares out or sell yours if for some reason you don’t wish to carry on with the business without the passed away partner.
In order to smoothen the disastrous business outcome of the partner’s death you need to plan for it in advance. For example, buy/sell agreements can be of a great value to any business. A properly written agreement is a legally binding contract that which outlines out exactly what is to happen if one of the business owners dies or becomes disabled. The document can be reasonably easy or very detailed as you wish it to be and can provide for many contingencies. Buy/sell agreement calls for the survivors to buy; and the heirs to sell; the deceased owner’s share in the business which can be one of the option you would like to go with.
Moreover, adequate life and business insurance should be implemented to cover not only the value of the 50% share of the business partner but also the debt that the business is carrying as at the time of the death of the business partner. It also must outline the effect of the death upon the cash flow of the business.
Please feel free to contact us if you find this matter complex to approach. We are more than happy to educate you, providing the tailored and most suitable solution.
If you want to learn more about how to protect your business and continue growing during the hard times of one of the partner’s death, we recommend you to attend Simplicity Funerals, Summit Care & Watson, Stafford & Zipkis Solicitor’s presentation at the Cumberland Business Chamber on the 5th of May 2014
They will show you an easy, friendly and compassionate manner, in how to manage the things we dread the most.
In addition to you learning all ins and outs of potential business risks associated with partnerships, we recommend you sticking around for another highly beneficial presentation by Jim Vass. Due to the common occurrence of most people going into business giving more thought to the design of their business cards than to some far more important (structural and legal) issues, Cumberland Business Chamber invited Jim to share his experience solving such issues.
We highly recommend you visiting the event in order to improve YOUR business.
This article is provided as general information only and does not consider your specific situation, objectives or needs. It does not represent accounting advice upon which any person may act. Implementation and suitability requires a detailed analysis of your specific circumstances.