Dissolution and Retirement – Section 26 of the Partnership Act provides that each partner can dissolve the entire partnership at any time with immediate effect. It costs you a bit of a lawyer`s fee, but it can save you a world of bereavement – and a lot more money – if you need it. It is also advisable to invest in so-called “key person” insurance coverage, which provides money to keep your business running and buys back a surviving spouse`s share in the event of death or disability. “However, once the transaction is operational, time is running out for the takeover and the parties will never have formalized a partnership agreement. Like so many problems in life, this one is best dealt with in advance. Ideally, partners meet in advance within a company and forge a partnership contract that dictates who does what in the company. As part of this process, you should also reflect and clarify what will happen if a partner dies, becomes unable to act or simply wants to move on to a new opportunity. If the company and its value grow or if partners come and go, you should check this agreement regularly and keep it up to date. In the absence of a formal agreement, a partnership must, through legislation, cease trade and be dissolved with the death of one of the partners. This means that in the event of the death of a partner, all assets will be liquidated and the proceeds will be distributed equitably between living partners and the deceased`s estate, regardless of their contribution.
Surviving partners are not allowed to buy or act. If you decide to take steps to decompensate yourself, the company`s profits and debts will be evenly distributed among all partners, including the deceased`s estate. The only way not to fairly distribute profits and commitments is when your agreement requires a different type of distribution. People who are in partnership with another, as well as individual entrepreneurs, are personally responsible for all of the company`s debts. Implementing a partnership agreement requires difficult decisions and strong discussions. But once that`s done, your business will be stronger and you`ll be free to put all your emotional focus on running the business, without being impressed by the question: “What would happen if my partner died tonight?” A properly drafted written agreement can resolve these potential problems by providing for the continuation of the partnership between the surviving partners, resulting in cash flow and tax-efficient provision for the transfer of the deceased partner`s share and the allocation of assets in the event of dissolution and liquidation. Statistically, the more people you have in your business structure and the greater your age differences, the more likely you are to face the unexpected death or disability of a business partner.