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What to do when a partner dies
or leaves
By Kara
Stefan • Bankrate.com
One of the most important things you must do
when your business partner dies or leaves the company is to update
your business records. Even then, the departure may still affect
the business.
"Whether you lose a business partner to death
or disagreement, the filing and administrative procedure of taking
his name off the books is not a problem. It's the implications that
can be much more severe in terms of marketing and customer retention,"
explains Kent Graham, a partner with the law firm of O'Melveny &
Myers in Century City, Calif.
Taking a partner's name off the books requires
three steps:
- Provide new instructions to your financial
institution
- Amend your annual statement with your state's
Secretary of State to indicate the new officers and directors
of the business
- Reissue stock certificates, if any, in the
name of the executor of the decedent's estate
According to Graham, these procedures are simple
if your partner has died. The financial institution may require
a copy of the death certificate. Beyond that, all that is needed
are written instructions to remove the decedent's name.
The requirements become more urgent and complex,
however, if the departure was under unpleasant circumstances. Then,
it's generally best to negotiate a mutual agreement to remove the
partner's name and issue joint instructions to your bank; otherwise,
you will have to convince the financial institution that you are
the business owner and have the authority to remove the partner's
name.
"The bank may also require the legal opinion
of outside counsel to verify that the new instructions have been
duly authorized," Graham says. "There are different gradations of
difficulty with this process, depending on the situation affecting
the partner's departure. However, nine times out of 10 the administrative
process is generally not a problem. It's a cut-and-dried process
that can be handled by your business attorney."
Kara Stefan is a freelance
writer based in Virginia
To comment on this story, please e-mail the
Bankrate.com
editors
-- Posted: May 20, 1999
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