Partnership Protection Information

Partnership protection should ensure that the partnership can continue when a partner dies and that the partners that survive can maintain control of the partnership.

A business partnership is the relationship that exists between people that run a business together and according to the 1890 Partnership Act states the partnership must be dissolved on the death of a partner unless a partnership agreement has been set up stating otherwise.

If there is no protection set up, the deceased partner’s heirs have a share of the value of the dissolution profits..

The Financial Conduct Authority does not regulate Trusts.

WPP Financial Services, Rochester, Medway, Kent, could help with this.


When a partner dies, the financial dependents of that partner, if the partner had no personal life insurance, could find themselves in a difficult financial position, and are often unable to take on the deceased partners role as they are not involved in the business and do not have the technology or knowledge to take that role.  Most likely they will want to sell on the deceased’s partnership interest to the surviving partners and the value of this will need to be decided and the surviving partners will need to have the funds to pay for the deceased partners shares. Usually the deceased’s financial dependents only are able to have a share of the dissolution value of the partnership but the surviving partners often want to continue  with the business.  

If there is an agreement between the partners that should one of them die the partnership would dissolve and assets be valued, and the dependents of the deceased get their financial share of the business as a result, there may be no need for additional lump sum payment through insurance to support the continuation of the business.

Setting up partnership protection

If a partner should die and the surviving partners want the business to continue they will have to have the money to buy the deceased partner’s share from the deceased’s estate and the deceased partner’s family will require cash. 

Partnership Protection sets out the procedures and policies to help you retain control.


  1. initially the the partners should agree what they want to happen should one of them die or become too ill to work.  
  2. Drawn up into a partnership agreement of what all partners would like to happen.
  3. Ensure that there would be enough cash available for the surviving partners to buy the share of the business from the deceased partner. 
  4. There are two options for raising the cash:

i. A bank loan at the time of the tragedy but this would incur interest on the amount borrowed and will need to be repaid and will require security e.g. A charge on the other partner’s house.  

ii. Organise for partnership protection policies to be in place that insures the life of the partners lies in conjunction with a partnership agreement.

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A partnership protection arrangement is often the preferred option as usually the surviving partner is not happy to to borrow more money to purchase part of what is their own business.

A partnership agreement ensures that the business does not have to be dissolved and that the surviving partners can purchase the deceased’s share from the family that have inherited them if they want.  As well as a partnership agreement, there should also be a buy and sell agreement. This commits the deceased’s heirs to sell the deceased partner’s shares. A cross option or double option agreement gives both sides the option of sale of the shares. However, if one side wishes to exchange the shares, the other side must fulfil the transfer i.e. if the remaining shareholders want to buy the shares they must be sold, or if the heirs of the deceased want to sell the share of the business they must be sold.  Both options require the surviving partners to have a cash lump sum and so there must be life insurance in place.

When setting up a Partnership Protection Insurance for a traditional partnership, each partner takes out a life insurance policy in trust for the benefit of the other partner and the partners pays the premiums adjusted if necessary to reflect each partner’s share.  If it is a Limited Liability Company the business is recognised as a legal entity and the business can own the policy and pay the premiums

Partnership protection payouts as a lump sum to the remaining partners should one of the partners pass away, or become diagnosed with a terminal illness.  The lump sum payout covers the funds you would need to buy out that partner.  The lump sum value that is paid out will depend on the amount you can afford in premiums and the cover you have gone for.

partnership protection insurance, wpp financial services, rosemount financial solutions, rochester, medway, kent
partnership protection insurance, wpp financial services, rosemount financial solutions, rochester, medway, kent

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