Business Insurance Life Part Viii-partnerships - What Happen to the Partnership if One Partner Dies

by Kyle J. Norton - Date: 2008-09-23 - Word Count: 345 Share This!

If one partner dies, it is no longer a partnership and the survivor becomes a "Liquidating Trustee." The business, as the partners knew it, ceases to operate.The survivor and the estate of the deceased can not: draw income, enter into new contracts, accept new orders, borrow money. The partnership business may continue
1. Until it has been wound up or re-organized or liquidated
2. If the surviving partner decides to carry on, they are responsible for: any new losses and paying interest and percentage of profits on the deceased's capital to the estate.

If the deceased did not have a valid will, the process is further complicated, because any partner or their representative can apply to the courts to wind-up the partnership, a successful business could be ordered into a forced liquidation or cheap sale.

If the surviving partner choose just to reorganize, there are several options
1. Surviving partner buys out the heirs
Both parties must agree on price and a method to finance the purchase.

2. Heirs buy-out the surviving partner
The heirs must have the experience to operate the business otherwise hiring a business operation manager will be costly and expose them to unlimited liability.
Of course, both parties must agree on price and a method to finance the purchase.
3. Sale of business to a suitable outsider
A suitable outsider may be difficult to find and he or she must have the cash or access to cash to buy in, acceptable to surviving partner.
4. Rollover to surviving heirs
The heirs must have the experience to operate the business and must obtain clearance from the estate's executor/executrix, after debts, taxes and administrative costs have been paid.

All these option can be easy to solve if the partnership have established a properly funded, binding buy-sell agreement prior to the death of a partner. This provides for the most welcome alternative - a willing, knowledgeable buyer with cash who must buy-out the deceased's partnership interest.

I hope this information will help. If you need more information, please visit my home page at:

Kyle J. Norton
All rights reserved. Any reproducing of this article must have all the links intact.

Related Tags: insurance, business, life insurance, business insurance, insurance quote, insurance agency

I have been studying natural remedies for disease prevention for over 20 years and working as a financial consultant since 1990

Your Article Search Directory : Find in Articles

© The article above is copyrighted by it's author. You're allowed to distribute this work according to the Creative Commons Attribution-NoDerivs license.

Recent articles in this category:

Most viewed articles in this category: