What Happens When Your Business Partner Dies in Maryland?

Starting a business with a trusted partner can be a rewarding experience. However, if your business partner, unfortunately, passes away, your business could be affected in a number of ways. Additionally, if you did not have a plan about what happens when a business partner dies, this could lead to various issues. If you require assistance in managing your business after the death of a partner, you should consult with an experienced Baltimore partnership dispute litigation attorney. The Heyman Law Firm can help you deal with any complications that arise in your business due to the death of a partner. Our firm is here to explain what happens when your business partner dies in Maryland.

Consequences After the Death of a Business Partner

After the death of a business partner, not only might you be suffering from the loss of a good friend, but you will also have to contend with the effects that partner’s death has on the business you both created. The preparations made by the business before the death of a partner will help determine what should happen to the business.

One factor that could affect a business after a partner’s death is the existence or non-existence of a partnership agreement. A partnership agreement sets out the parameters of the business relationship and is typically signed when two or more business partners establish their company.

Decedent’s Estate Takes Over

A comprehensive partnership agreement should have a provision that provides a plan for the company to follow should an owner pass away. For example, some partnership agreements will arrange for the deceased partner’s estate to seize control over the partner’s share of the business. When this occurs, you may have to operate the business jointly with whoever is in charge of the partner’s estate or any beneficiaries of the partner.

Operating your company with your former partner’s heir can be difficult if they are not aware of what skills and resources the partner brought to the business. That is why it would be wise to avoid a situation where you are forced to work with an unpredictable heir to your former partner’s half of the business.

Transfer of the Deceased Partner’s Share

Another scenario that may be arranged using a partnership agreement is to transfer the deceased partner’s share to the other remaining partners. Many agreements that allow a partner to purchase their partner’s share of their business often provide for the business partner to make a payment to the deceased partner’s estate.

If there are multiple owners in a business, they may choose to split the ownership interest of the deceased partner.

Buy-Sell Agreement

A buy-sell agreement can be drafted apart from a partnership agreement to set out the terms and conditions regarding a partnership. Buy-sell agreements can be used to address a number of factors regarding buying a partner out:

• Who can purchase the shares of a deceased partner
• Whether the partnership will absorb the shares of a deceased partner
• The cost of a buyout when a partner passes away

Having a buy-sell agreement drafted by an experienced business attorney can save you a lot of time and money if a business partner, unfortunately, passes away. Do not wait until tragedy strikes to make plans that could substantially impact your business.

Selling of the Partnership

If a family member or the estate of a deceased partner cannot operate the business in their place or if you do not have the funds to purchase your partner’s half of the business, you may be forced to sell the business.

Selling your business should be your last resort after a business partner passes away. However, if you have exhausted all your options, it is wise to avoid hanging onto a business that will continue to lose value.

There are some steps that business partners could take to alleviate the burdens on a business after the death of a partner. For example, you could purchase key-person insurance coverage on the owners of the business. A key-person insurance plan will provide your business with funds if a necessary business partner becomes disabled or passes away. This is just one option for business partners, and the Heyman Law Firm is prepared to offer our business advisory services to search for other solutions to your issues.

Contact an Experienced Maryland Legal Business Solutions Lawyer Today

If your business partner passed away, and you are uncertain about what will happen to your business, you should consult with an experienced Maryland legal business solutions lawyer. At the Heyman Law Firm, our business lawyers can help you handle any unexpected issues that may arise due to the death of a business partner. To schedule a confidential consultation to discuss your legal options, contact the Heyman Law Firm at (410) 762-0140, or contact us online.