What would happen if your business partner died suddenly?
Indeed, what would happen if you suddenly died?
Planning for the death of a partner in a business must be looked at from both sides of the equation. What are the needs and expectations of the survivors in the business and the members of the deceased estate?
Contingency plans for the death of a business partner can be incorporated into a Buy/Sell Agreement. A properly drafted Buy/Sell Agreement with appropriate insurance covers should ensure that there is sufficient cash to enable the deceased partner’s estate to be paid out. What you need to do is periodically update the Buy/Sell Agreement.
Make sure it reflects the current value of the business and try and get insurance covers on the partners that reflect the value of their share in the business. It is very important that a commercial solicitor drafts the Buy/Sell Agreement, checks the company documentation and Wills to ensure that, in the unfortunate event of a premature death, the business will be able to survive and the deceased partner’s estate will be able to be paid out.
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Article by Christie Lewis
Christie is Practice Manager at Alan Lewis Accountants . Besides accounting, her passion is for all things small business (and blogging, of course). You can contact Christie directly at christie@lewistaxation.com.au.
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