Perpetual Succession in LLPs
The essential aspect of an LLP is perpetual succession. This means that the LLP will continue to exist indefinitely regardless of whether one of the partners dies. This distinguishes LLP as a separate legal entity from its partners. LLPs have their own rights, such as the ability to possess property, enter into contracts, and invest.
What Happens If a Partner in an LLP Dies?
In LLPs, if a person dies or resigns, there is no effect on the LLP. However, in the case of a partnership firm, the partnership is typically dissolved. An LLP is a separate legal entity in which partners and the LLP are distinct from each other.
Removal of Partner in Case of Death in LLP
Documents required for the removal of a partner in case of death include the LLP Agreement, a copy of the resolution passed in the meeting of the LLP with the consent of existing partners, a death certificate, and the digital signature of an authorized designated partner.
Limited Partnership Dynamics
When a partner in a limited partnership dies, the partnership comes to an end, but the remaining partners can continue the business. The deceased partner’s share usually goes to the heirs as per the partnership agreement.
General Partner Responsibilities in Limited Partnerships
The general partner in a family limited partnership is personally liable for debts, unlike limited partners who are not personally liable. Creditors can seize personal assets of the general partner but not the limited partners.
Withdrawal and Dissolution in Limited Partnerships
The death of a limited partner does not dissolve the limited partnership. The personal representative inherits the deceased limited partner’s partnership rights. When a general partner withdraws from a limited partnership, legal filings must note the change in partners.
Partnership Continuation Strategies
The partnership agreement should outline how the business continues after a partner dies. Often, remaining partners purchase the deceased partner’s share. If the partnership dissolves due to the last remaining partner’s departure, the business must wind down operations.
Planning for Partner Departures
Key person insurance can fund buyouts if a partner dies. Partners can adopt predetermined valuations and buyout terms for such events.