How to proceed with buy-sell in a partnership business?

bse It is indeed very essential to have clear cut terms and conditions with regard to buy out or sell off in a partnership firm in case one of the partners meets an unfortunate event like accident, unexpected death, disability, illness etc.

It is the duty of the chief executive officer to ensure that proper paper work is done and maintained to settle any dispute arising out from any of the above mentioned situations.

Being the owner of the partnership firm you have to shoulder the responsibility with others to decide on factors that would allow a partner to sell or buy another’s share.

Given below are some instructions that can guide you better:

Step 1 – Analyze the nature of partner’s disability i.e. is it of a permanent nature or temporary. Think further ahead as to how it would affect the existing firm?

Step2 – Calculate the loss in monetary terms. Leave the emotions aside, you have to be practical because business in an entity having a separate legal identity.

Step3 – follow the same procedure to determine the extent of loss suffered by the business if a partner happens to meet an untimely death.


Step4 – Look for suitable candidates who could fill or replace the deceased/disabled partner. Family members or spouse of this partner can be absorbed into the business subject to fulfillment of certain essential conditions such as willingness, age eligibility and competence.

Step5 – Seek assistance of a proficient lawyer or attorney who can guide you through the legal procedures of buying or selling. Draft an agreement in consultation with all the partners to include the vital clauses related to disability or death buy out.

Step6 – Hire the services of an insurance agent specializing in matters related to partnership firms such as death, disability, medical illness etc. Chalk out a feasible package that gives maximum insurance coverage with reasonable premium and maturity conditions.



Bhrat Brij

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