While a sobering question, determining how your future might change if your business partner passes away can help you be proactive and make appropriate plans for your business and family. Many business owners, especially younger ones, assume that their business partner will be around for a long time. However, due to illness, accidents, and other circumstances, some find themselves dealing with the death of a business partner and wondering what to do next.
One of the best ways to make plans for the possible death of a business partner is to draft and sign a partnership agreement. Usually a document stipulating operational procedures and owner responsibilities, a partnership agreement can, and should, contain a section that specifies what steps will be taken if a business partner passes away. For many, this includes percentages and figures for a buyout, should the living business partner decide he or she would like to own the deceased partner’s portion of the company.
If a business partner passes away and no partnership agreement exists, individuals often have four options. First, they can liquidate the business. While seemingly straightforward, selling a business after a partner’s death often comes at a high cost. Individuals lose any future income potential from the company and may have to sell at a discounted price. The second option involves bringing the late business partner’s heirs on as members of the company. While not for everyone, this possibility can work for some. A third option would be to sell to the heirs of the late business partner.
Again, without agreed upon figures, this option can be difficult to navigate, with both parties refusing to budge on their idea of a fair price. The last option is to buy the late business partner’s portion of the business, often called a buyout. Understanding the options and challenges that present themselves when a business partner passes away without a partnership agreement underscores the importance of putting an agreement in writing before you think you need it. If your business partner has passed away and you are faced with the overwhelming situation of what to do with your business, a skilled Houston business lawyer can help.
With more than 28 years of experience, I have helped a number of businesses deal with a range issues. I understand that each business is unique and work with clients in an individualized manner to reach the best solution for their situation. Contact Patricia M. Davis, Attorney at Law today to schedule your personalized consultation and get the legal counsel you need.