How Do I Keep My Business Going in the Event of the Loss of a Partner?

A Video FAQ with Mark A. Williams.

It is usually important if you have partners in a business to have some type of buy-sell agreement. Partners should agree on what happens if one of them passes away, becomes disabled, or simply doesn’t want to work anymore. Usually you can fund these types of situations through insurance or through the company saving up so that if a partner does want to walk away from the business the other partner can purchase the interest and keep the business going. There are a lot of other ways to do it, but sometimes for simplicity it’s best to think about when two people come together for a partnership, you need to decide what is going to happen when they don’t want to work together anymore.

© 2014 Parsonage Vandenack Williams LLC

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What Is the Best Way to Resolve Disputes Between Business Partners?

A Video FAQ with Ronald K. Parsonage.

As a practical matter, what you would like to see clients do is establish ahead of time what the responsibilities of each partner are so that they can act appropriately and understand what their responsibilities are with their other partners. In that manner, they can establish whether there need to be adjustments in compensation or other matters can be handled. As a practical matter, they don’t do that; therefore, what we really would hope is to have a clear exit strategy that they could follow by reason of having a buy-sell agreement that would be fair to everyone.

© 2014 Parsonage Vandenack Williams LLC

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What Are Buy-Sell Agreements?

A Video FAQ with Mary E. Vandenack.

Buy-sell agreements are agreements between owners of a business governing the relationship. Typically, they will govern what happens when one of the business owners wants to leave. A buy-sell agreement will cover different types of situations as well. If the owners also work for the business, it will cover what happens when one of the owners decides to discontinue working for the business. Another issue that will be covered is what happens if one of the owners becomes disabled or if one dies while owning the business. An important aspect of the buy-sell agreement is determining the value—so how much is going to be paid out to a business owner that dies or becomes disabled. Another issue is the terms of a buy-out. Is it going to be an issue for the business to figure out how to fund a sudden payment to an owner of the business. Often strategies like life insurance or disability funding for a buy-out are used to assist with that.

© 2014 Parsonage Vandenack Williams LLC

For more information, Contact Us