13th October 2026
Many successful businesses begin as a simple arrangement between people who trust each other. The business grows, the relationship works, and putting anything in writing never feels like a priority.
That approach can work for years. The problem comes when a partner dies or decides to leave. Without a partnership agreement, the future of the business is governed by default legal rules that were never designed around the needs of your business or the intentions of the people involved.
Jen Goodwin, Director and Head of Corporate at Myers & Co, explains what can happen when a partnership has no written agreement in place.
The partnership is dissolved.
Where the partners have nothing in writing, the default rules for business partnerships in England and Wales end it automatically when any partner dies.
The same happens if a partner goes bankrupt. Dissolution does not mean the doors close that afternoon. It means the firm moves into a winding up, and the partners’ authority narrows sharply.
That distinction is where the trouble lives. Nothing looks different: the staff arrive, the orders come in and the invoices go out. Legally, however the business has ended.
Key takeaways
Yes, in practice, though not as the same firm.
Once a partnership has dissolved, each partner can only commit the firm to what is needed to wind it up and finish work already begun.
Carrying on properly means two things.
A fresh partnership between those who remain, and agreed terms about the share belonging to the partner who died.
Until that happens the remaining partners can:
A new lease, a new partner or new borrowing sits outside that.
It usually surfaces in something ordinary: the bank asking who signs now, or an insurer asking who the partners are.
As well as the legal consequences, there are a number of practical matters that the remaining partners will need to address when a partner dies and there is no partnership agreement in place.
One of the first issues is often the partnership’s bank account. The bank may need to review the existing mandate, particularly where the deceased partner was an authorised signatory or managed the partnership’s online banking.
The remaining partners may therefore need to consider:
The bank should be contacted promptly to establish what arrangements need to be made. The remaining partners should not assume that the existing account can simply continue to be operated as before. They will also need to distinguish between payments connected with winding up the existing partnership and transactions relating to any new business carried on by the remaining partners.
It is also important to establish exactly what the partnership owns. Partnership assets do not simply become the personal property of the remaining partners and will need to be identified and taken into account when the partnership’s financial affairs are settled.
Depending on the business, this could include property, vehicles, machinery and equipment, stock, work in progress, money owed by customers, intellectual property, websites, domain names and goodwill.
The remaining partners should consider:
Preparing a clear record of the partnership’s assets at an early stage can help ensure that nothing is overlooked. It can also assist the accountants and the deceased partner’s personal representatives when establishing the partnership’s financial position and determining the value of the deceased partner’s interest.
The remaining partners should also identify the individuals and organisations that need to be notified. Depending on the nature of the business, this could include the bank, accountant, insurers, landlord, key customers and suppliers, HMRC, finance providers and relevant licensing bodies.
Consideration should also be given to the practical operation of the business. For example, the deceased partner may have controlled email accounts, accounting software, card-payment facilities, websites, cloud storage or social media accounts. Where this is the case, arrangements should be made to secure the information and transfer appropriate access.
Finally, if the remaining partners intend to continue the business together, they should consider how future trading will be structured. New quotations, orders, contracts and invoices should reflect the business that is actually carrying on the trade, rather than simply continuing to use the details of the former partnership.
Their estate gets their share, worked out by settling the accounts in full. The order of payment is fixed.
Outside creditors come first, then money the firm owes partners for anything they lent it, then capital. What is left is split in the proportions profits were shared.
What surviving partners miss is what is owed for the delay.
Say the business keeps trading on that share without settling up. Whoever is dealing with the estate can then pick between a slice of the profits earned since the death that comes from using that share, and interest at 5% per year on it, until it is paid out.
HMRC’s guidance to its own staff says the same. For a business that is asset rich and short of cash, that bill grows while the negotiation drags on.
Not necessarily.
In a general partnership, a partner cannot simply retire and expect the business to continue as normal. Unless there is a written partnership agreement dealing with retirement, every partner must agree to that person’s departure.
If agreement cannot be reached, a partner in a partnership with no fixed end date may have the right to dissolve the partnership altogether. In other words, bringing their involvement to an end could mean bringing the entire partnership to an end.
A recent Court of Appeal decision highlighted an important distinction. A partner leaving a business is not always the same as the partnership being wound up completely. Where the remaining partners agree to continue the business, the departing partner may still be entitled to receive a fair value for their share, even though the business itself carries on.
The key point is that, without a partnership agreement, a partner’s exit can create uncertainty for everyone involved and may lead to consequences that none of the partners intended.
Almost all of it.
The default rules only fill the gaps the partners left. A written agreement keeps the firm alive when a partner dies or leaves, fixes how a departing share is valued, and says when it has to be paid.
| Question | No written agreement | With a written agreement |
| Does the firm dissolve on a partner’s death?
|
Yes, automatically
|
Only if the agreement says so
|
| Can a partner retire and leave the others trading?
|
Not without unanimous consent
|
Yes, on the agreed notice
|
| How is the departing share valued?
|
On a final settlement of accounts
|
By the method the agreement names
|
| When is it paid out?
|
No fixed date
|
On the agreed timetable
|
| What is owed while payment waits?
|
Profit share or 5% per year
|
Whatever the agreement provides
|
The best time to deal with these issues is before they become problems.
Putting a partnership agreement in place while everyone is on good terms is usually straightforward and far less costly than trying to resolve uncertainty after a partner leaves, retires or dies. A well-drafted agreement can set out what should happen in those circumstances, giving all partners clarity and helping to protect the future of the business.
This is why partnership agreements and succession planning sit together in the corporate work our specialist team carries out.
Before looking at partnership agreements, it is important to understand how the business is structured.
The legal position can vary significantly depending on whether a business operates as a general partnership, an LLP or a limited company. Taking the time to identify the correct structure and put clear arrangements in place can help avoid uncertainty if an owner dies or decides to leave.
The sequence is short:
1- Confirm the structure and who the partners legally are.
2 – Write down what has been agreed in practice so far.
3 – Decide whether the firm continues after a death or an exit.
4 – Agree how a departing share is valued and when it is paid.
5 – Consider life cover or cross option arrangements to fund a buy-out.
Putting clear arrangements in place early gives partners certainty about the future and can help avoid difficult and expensive disputes further down the line.
Is a verbal partnership agreement worth anything?
It can bind the partners but proving it is the difficulty. Terms genuinely agreed and followed for years may displace the default rules. Reconstructing them from memory after a death is no substitute for paper.
Is an LLP treated the same way when a member dies?
No. A limited liability partnership is its own legal entity, registered at Companies House and run by its own members’ agreement. It does not dissolve automatically. The rules here apply to general partnerships only.
Does a general partnership have to be registered anywhere?
Not at Companies House. It registers with HMRC for tax, through a nominated partner. There is no register of its terms, which is partly why so many have none.
Do we need to tell HMRC when a partner dies or leaves?
Yes. A partnership has a nominated partner who handles its tax returns and records, so a death or departure can change who that is. Ask your accountant how the change affects each partner’s return.
The death or retirement of a partner can create serious uncertainty for a business, particularly where the partners have never agreed what should happen if circumstances change. Taking time to put the right arrangements in place now can help protect both the business and the people behind it.
At Myers & Co, we advise business owners on partnership agreements, succession planning and business structures, helping them avoid unnecessary disputes and giving them greater certainty for the future.
If your partnership has no written agreement or has one nobody has read since it was signed, give us a call on 01782 577000, or make an enquiry to find out how we can help.
