What if my business partner dies with no will?
If your business partner dies unexpectedly, your business will naturally be thrown into turmoil. If he or she has not made a will, that turmoil is likely to be far greater and longer lasting that it could be if a will had been made.
Without a will:
- there is nobody with clear authority to step into your deceased business partner’s shoes and manage his or her interests in the business;
- there may be a significant delay, particularly if there are disputes within his or her family, before an administrator is appointed to the partner’s estate, who can take that role;
- the person who is appointed administrator may not be an appropriate person to be involved in your business;
- equally, the people who are beneficiaries of the partner’s estate, under the laws of intestacy, may not be appropriate business partners, or may in some circumstances push to have the business as a whole sold in a “fire sale” in order to try to get money quickly.
A retail chain business with four owners has decided that a condition of being an owner in the business is to have a will and power of attorney in place. The owners have agreed on specific provisions about the business, to be included in those documents.
The will provisions (together with other key documents) ensure that in the event of an owner’s death:
- an agreed trusted advisor steps in to administer the owner’s interests in the business;
- the owner’s interests in the business are passed in an orderly fashion under pre-agreed arrangements, which allow the other business owners to buy them out, or to bring in an additional new owner to do so;
- pending that sale of the deceased owner’s interests, the business as a whole can continue to operate with minimal interruption;
- in addition, the value of the deceased owner’s interest in the business is protected.
The business owners invested a lot of thought, over time, in their requirements. The outcome is confidence that a personal tragedy for any one of them will not threaten the business long term.
It is worthwhile having a conversation with your business partner (s) about whether they have a will and about who will be taking over control of their interests in your business if they die.
We thank Clinch Long Lethbarrow Lawyers for this comment.
If you wish to establish a Family or Business Will please call our In House Solicitor, Sarah Hatch on (02) 9904-4222 or email Sarah.Hatch@tauruslegal.com.au
Synchron is not responsible for advice provided by Solicitor Sarah Hatch of Hatch & Associates Pty Ltd.
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