What happens if my business partner dies?

It’s not something anyone wants to think about—but it’s a question that every business owner should ask:

“What happens to my business if my business partner passes away?”

At McMillans, we’ve seen firsthand how lack of planning can lead to complex, costly and emotionally difficult situations. The good news is, with the right agreements and advice in place, you can protect your business and your family’s financial future.

A Will Isn’t Enough

Many business owners believe that having a will takes care of everything. But here’s the catch: wills only deal with personally owned assets.

Most business interests are held in structures like companies or family trusts, which fall outside your personal estate. That means your share in the business may not be covered by your will—leaving your family, and your business partner, in a difficult position.

What If a Spouse Inherits a Business Share?

Even if your spouse inherits your business interest, this often leads to unintended and awkward outcomes:

  • Your partner’s spouse suddenly becomes your new business partner

  • The spouse may have no interest or experience in the business

  • They may rely on income from the business to survive

  • You may not be able (or willing) to buy them out quickly

This can strain the business financially and emotionally, and even jeopardise its future success.

How Business Succession Planning Can Help

A business succession plan ensures that, in the event of a partner’s death or disability, the business can continue running smoothly—and that the family of the deceased partner is fairly compensated.

Here’s how it works:

Life insurance is taken out for each partner

This insurance is designed to cover the value of their share in the business.

A business succession deed is prepared

This legal agreement outlines what happens if one partner dies or becomes permanently disabled.

A Real-World Example: Bill & John

Bill and John are business partners. They each:

  • Take out life insurance

  • Sign a business succession deed

When Bill unexpectedly passes away:

  • His wife receives insurance proceeds equal to the value of Bill’s business share

  • John takes over full ownership of the business, without needing to borrow a large sum to buy out Bill’s share

The outcome? A seamless transition that honours the agreement and protects both parties.

What About Disagreements or Someone Leaving?

It’s not just death or disability you need to plan for. A shareholders agreement or partnership agreement can help define:

  • What happens if a partner wants to exit

  • How the business is valued

  • The process for resolving disputes or deadlocks

The key is to set these things up while everyone is on good terms and thinking clearly.

Need a Plan? We’ll Help You Build It

At McMillans, we can:

  • Help you navigate the financial side of succession planning

  • Coordinate with your solicitor to draft the right legal agreements

  • Assist with insurance structures and funding strategies

  • Guide open, productive discussions between business partners

Protect Your Business—and Your Peace of Mind

A well-structured succession plan ensures that your business survives, your family is looked after, and your legacy remains intact. Don’t leave it to chance.