What to Do If Your Business Partner Dies
Is your business partner nearing the end of their life? If so, it’s crucial for you to understand what your options will be once they pass away. The future of your organization may depend on it!
For most people, there are four options to explore after their business partner dies. They are:
Taking on the Decedent’s Heir as a Partner
When your business partner passes away, their stake in the business will likely be inherited by a member of their family. If you have a positive relationship with their heir, you may choose to take them on as your new partner.
Be warned though, that your partner’s heir might not have the same skills, experience, or passion for the business they had. As such, they may need to take on a different role in the organization.
Buying the Heir’s Share of the Business
If you want to continue operating your business, but do not want to work with your partner’s heir, you’ll likely need to buy them out of their share of the company.
If the heir is interested in selling, this process should be fairly straightforward. All you need to do is negotiate a fair price and work with a California business lawyer to formalize the sale.
However, if the heir doesn’t want to sell you their stake, this process may get pretty complicated. You may have to pay above market value if you want to finalize the deal.
Selling the Business to the Decedent’s Heir
If you are no longer interested in running the business after your partner loses their life, you may want to consider selling your stake to their heir.
Bear in mind, though, that the death of a family member can wreak havoc on an individual’s financial situation. As such, the heir may not have the funds to buy your stake for market value.
You might need to be flexible with your valuation if you want to pursue this route.
Selling Your Business to Another Party
If your operating agreement allows you to do so, you might wish to think about selling your stake in the business to a third party.
Outside investors won’t have the same financial constraints as your partner’s heir. You are much more likely to maximize your returns if you take this path.
However, selling your share to a third party might have negative effects on your relationship with your partner’s heir and their extended family. If you value those relationships, tread carefully.
A California Business Lawyer You Can Count On
Do you need a knowledgeable business attorney in San Diego to help you prepare for the death of your partner? If so, you have come to the right place. The team at the Semanchik Law Group has been helping California business owners protect their interests for years, and we’d be more than happy to do the same for you.
To schedule a consultation with a member of our legal team, all you need to do is give us a call at (619) 535-1811 or contact us online.