If you’re a partner in a business, managing the death of another partner can prove challenging. Not only do you have to deal with the emotional effects, you also need to think about the management of your company going forward. Specialist solicitors Ellison Thomas have put together this guide to everything you need to be aware of if your business partner passes away.
If your business partner dies without making a will, a set of laws referred to as ‘intestacy’ will come into effect. This will result in any assets or shares in the business being split amongst family members.
Should intestacy occur, what happens to their share of the business is outside of your control. If the family members decide to sell the shares to you, you will become the sole owner of the company, but this means you will also be solely responsible for any debts the business has.
Unfortunately, the family of the deceased are under no obligation to sell your partner’s shares to you, so you may find yourself having to come to terms with a new business partner who otherwise may not have been your first choice!
If your business partner made a will prior to their death, they may have stated what they wish to happen to the business or their shares going forward. This is likely to make the process of organising the business after their death much simpler. However, this is not always the case.
According to UK law, if a person married after they made a will, their will is no longer valid and the rules of intestacy will apply as outlined above. Alternatively, your business partner may choose to leave all of their things to their family, which will result once again in a similar process to intestacy.
If you are in a business partnership, it pays to spend some time ironing out plans for the future of your business under a range of circumstances. Specialist solicitors, such as Ellison Thomas, can help you to draw up a formal Partnership Agreement which will determine what happens to the business if one of you passes away.
Normally, this would state that the remaining partner would be permitted to purchase the shares from the partner that has passed away, but can be varied based on what suits your personal circumstances.
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