Many small yet successful businesses operate as a partnership of one, two or more individuals, each one of which often brings a unique and valuable skill to the table.

If one of the partners dies, their share of the partnership or company passes on to his estate, often a surviving spouse or children.

Technically speaking, if the business is a partnership, the partnership is dissolved, which may not be convenient to the surviving partners. If the business is a limited company, the surviving benficiaries will inherit the deceased shares, and in so doing, will own part of and possibly even gain a controlling influence over the remaining business, but without necessarily having the knowledge or skills to contribute.

It is often in the interest of all parties to put in place an agreement that allows the surviving partners or shareholders of a company to 'buy out' the interest of the deceased person.

Such an arrangement can provide the deceased heirs with a cash lump sum equivalent to their inherited share, whilst returning ownership and control of the business to the surviving business.

There are a number of ways of planning, including buy and sell agreements, and cross option agreements. The most suitable option will depend upon your company's circumstances and those of its potential benficiaries.

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