What Happens When Your Business Partner Leaves?

Everyone starts a business hoping for lasting success and strong partnerships. But what happens if the unexpected occurs?

What if your partner dies, decides to leave, or the business fails?

You need a plan.

The Best Time to Plan

The best time to create that plan is at the beginning—when things are running smoothly. Trying to negotiate an exit strategy after a relationship has soured or a tragedy has occurred is often too late.

Options to Protect Yourself and Your Business

Here are a few options to ensure your business survives the loss of a partner:

1. Buy/Sell Provisions

Including Buy/Sell provisions in your Operating Agreement acts like a “prenup” for your business. It outlines exactly how a partner’s share will be valued and sold if they leave.

2. Key Man Insurance

Key Man insurance is a life insurance policy on a specific partner. If that partner passes away, the insurance payout provides the funds needed to buy out the deceased partner’s heirs, ensuring the business can continue without financial strain.

3. Specific Buyout Provisions

You need specific provisions in the Operating Agreement regarding the buyout of a leaving partner. This defines the terms of payment (e.g., lump sum vs. payments over time) so the business’s cash flow isn’t crippled by a sudden departure.

Build a Comprehensive Plan

These tools help protect you, your business, and your partner’s family. Work with Moseman Law Office to build a comprehensive plan now, before you need it.