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What happens when the unthinkable happens and your business partner dies?

Do you have this contingency covered in your business planning?

What Is A Business Will?
A business will is usually part of the business agreement which protects the wishes of the deceased, and also ensures the protection of the remaining business partner.

Jill & Mary's Business Partnership
Let's say Jill and Mary go into a specialty florist wholesale business together. They've always been friends, so just work things out between themselves, informally. They've never got around to discussing or formalizing a business agreement. 

The State Of The Business
They are equal partners, each with a 50% share. The business is thriving, and they manage a staff of 10. They have a major potential customer lined up and are in negotations. They've recently been awarded a national award and the future looks bright.

The Unthinkable Happens
Then the unthinkable happens and Mary dies suddenly. Jill is coping with the loss of her friend, but after a few days away, she gets back to the business. Mary was divorced and has no children. All Mary's assets were left to her brother, Tim who lives interstate.

Mary's Brother Tim Enters The Picture
Tim is not really interested in the florist business. He is a teacher by trade, and has no experience in business but is debating what to do. He remembers Mary saying the business meant the world to her and she felt it had a solid future.

What are the implications?
Without an official business will, the following are possible scenarios -

• Tim could come into the business and take over Mary's 50% share, including the decision making rights that entails.
  
  
• He could sell his 50% share on the open market, and is not obligated to give Jill first option.
  
  
• He could come into the business for a while and sell his share when he wants to without any notice to Jill.
  
  
• Hopefully, he will sell to Jill at 50% of the fair market value of the business for a smooth transition, but he is not obliged to.

Forward Business Planning
While the death of a business partner is not pleasant to think about, forward planning may save your business. It also saves having to research all options from scratch at what is a stressful time for you and your business partner's family. Plus, it keeps your business operational until things can be finalized. 

Related Small Biz Mentor Article
What Happens To Your Passwords When You Die?

What Are Your Thoughts?

• Are there other things to think about in the business planning and agreement process?