Partners come together to do business because they have an understanding with each other and have, hopefully, a chemistry between them to run a successful business. The partnership is between the individuals who come together to work with each other - and it is not, often, a partnership between families.
So, if a partner passes away then there has to be a way for the family of the deceased partner to be paid the value of the partnership (equity) interest of the deceased partner and released from the ownership in the company.
One of the easiest, yet most ignored, way to manage such transition is a Buy-Sell Agreement. This agreement provides for a way for the family of the deceased to be paid a fair value of the share of the deceased partner. This agreement needs to be funded, which means that the company must have funds available to pay the value to the family which such unfortunate event happens.
If you are in a business in partnership with others, you must take care of this important aspect of any business venture where there are more than one owners.
Enter into a buy-sell agreement with your partners and arrange for funding such agreement adequately, and you would have taken care of one of the most crucial aspect of business with multiple owners. Such arrangements help an excellent transition and life forward for the surviving business and the surviving family.
