Business partnerships are relatively common. Two or more people choose to start and operate a company jointly. By pooling their skills, time and resources, they may significantly increase their chances of developing a profitable organization.
Partners often trust one another and may work together successfully for years. Both parties profit from the success of their joint venture. However, partnerships may end abruptly when one partner dies, possibly prematurely. Does the surviving partner have an automatic right to inherit the other partner’s interest in their company?
Estate planning is necessary to choose a beneficiary
If a business owner wants their partner to inherit their interest in a company, they need to plan accordingly. The owner’s interest in the company is part of their estate after they pass. Typically, the terms of an estate plan dictate who inherits specific assets from an estate.
Beneficiaries named in a will can assume control over a deceased partner’s portion of the company. After a business owner dies without a will, their immediate family members inherit their interest in the company.
Typically, that means that their spouse or children assume their interest in the organization. Depending on the type of company and the nature of a partner’s relationships, they may need to think carefully about who takes over their ownership interest, as well as their role within the company.
Proper estate planning as a business owner often requires a combination of different steps, including designating beneficiaries in personal documents and succession planning to address business continuity concerns. Reviewing personal and organizational needs with an attorney can help people prepare for the worst-case scenario and protect an organization that they created or help operate.