This unfortunate situation plays out time and again in businesses around the world. The death of an active business partner places undue stress on both the business and the surviving partners.

Business owners must be prepared for any eventuality that might affect their businesses, including the sudden departure of a business partner. Disaster can be avoided if business partners have an up-to-date buy-and-sell arrangement in place.

A buy-and-sell arrangement consists of two parts:

First, a buy-and-sell agreement, which is a written agreement entered into between the partners, compels the surviving partner to purchase the deceased partner’s shares from the estate and compels the executor to sell.

The second part is a set of insurance policies over the co-owners’ lives, usually equivalent to the market value of their respective share in the business.

An up to date buy-and-sell arrangement can save the future of a business. After the passing of a partner, surviving partners would receive a pay-out from the insurance policy. They would then use this money to enforce the buy-and-sell agreement by purchasing the departed’s share of the business, which the executor is compelled to sell.

A buy-and-sell arrangement enables the remaining owners of a business to choose who their future business partners will be, while protecting the businesses’ profitability and continuity. It also gives the family of the deceased partner the assurance that they will receive a market related price for the deceased partner’s share of the business.

If you’d like to set up one of these agreements or review your current agreement - I can help you out. Let’s get in touch!

Ideas from: Business Buy-and-Sell: What happens when a business partner dies?