The death of a business partner, whether suddenly or after a long illness, will always be an upsetting time, but ensuring that an action plan for such an eventuality is in place will go some way to mitigating any stresses related to the continued running of a business. As the saying goes, ‘forearmed is forewarned’.
When entering any business partnership, it’s important to draw up a business partnership or share sale agreement. The agreement sets out the rules for any succession of the business, enabling any remaining business owners to continue running the business with minimal upheaval and disruption. Additionally, it should include information on how each of the partners want the business to be run in the event of their death. Details on the rights and responsibilities of each partner should also be included, ensuring that there is clarity in the sharing out of extra roles and responsibilities.
Typically, a business partnership agreement will also include other information to facilitate the smooth running of the business by the remaining partners. These include:
- The buyout provision for any remaining partners including ideally details of any life cover in place to give effect to those provisions
- Details of delegation and decision-making roles for any successors of the deceased partner
- Information on ownership and management responsibilities
- Any development and training needs that may arise as a result of additional responsibilities, and whether external expertise is required
- Information relating to the retention of key employees
- A timeframe of the transfer of the business.
It’s also vital that all business partners and major shareholders have an up-to-date Will and Lasting Power of Attorney in place. Dying intestate can leave remaining business partners in a difficult situation. Aside from the likelihood of extra taxes, there is also the possibility that any family who inherit the business as a result of intestacy may have no legal obligation to sell their share of the business to the co-owners. This could potentially lead to a situation where an uncooperative business partner effectively hampers the efficiency and profitability of the business.
A Lasting Power of Attorney is always advisable to anyone partnering in a business and provides peace of mind that should they be incapacitated, a trusted, delegated attorney will handle their business affairs with their best interest at heart.
Jarmans Solicitors have a thriving commercial law department that can ensure that your business and business partners are protected in the event of your death. Contact us to make an appointment with our commercial team.