None of your business?

September 3rd, 2008

Are you a shareholder or partner in a business?  Have you thought about the impact of one of your co-owners dying or suffering a critical illness and how a fundamental change in ownership could affect your business long-term?

The death of a partner or shareholder is potentially one of the biggest risks facing a small business.  Usually the deceased’s interest in that business will pass to the beneficiaries of his/her estate (usually immediate family) who may not want to take an active role in the business.  If the beneficiaries do choose to sell the share they have inherited then there is no guarantee the buyer(s) will have the same ideas or outlook as the deceased did.

In the above scenario the preferable outcome for all concerned would more than likely be for the remaining partners or shareholders to have an option to buy the deceased’s interest in the business, but business owners very rarely plan for this eventuality.

The good news is that there can be a solution.  This essentially is comprised of two parts: