When Your Business Partner Falls Ill
By Nina Kaufman, Esq.From Scotland, a cautionary story that is relevant to millions of business partnerships over here: What happens when a key person in your business, such as your business partner, becomes seriously ill, disabled, or dies? Do you have a Plan B? A contingency plan to ensure that your company can continuing functioning?
In this reported case, a member of senior management was killed in an accident. The company had no meaningful continuation plan and no insurance in place to handle the buyout or the interruption of the business. The company never recovered from the blow and closed its doors nine months later.
A written business partnership agreement can help plan the transition by addressing (1) when disability (or other buyout situation) kicks in, (2) how the affected business owner’s ownership interest will be valued, and (3) the orderly transfer of business ownership. But that’s not all there is to it.
It’s hard enough to get business owners to come to the table to create a partnership agreement. Even fewer take that next necessary step of securing the insurance that can fund the provisions. Having an agreement without the insurance is like having a car without a motor: you may think you’re fully protected, but you won’t be able to get anywhere.
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