A partner's death dissociates that partner from the partnership the moment it happens; it does not, on its own, end the business. Section 601(7)(i) of the Uniform Partnership Act (1997) makes death an automatic dissociation event, and in an ordinary partnership at will, the surviving partners simply continue, owing the estate a buyout under section 701. In a partnership formed for a fixed term or a specific project, death only dissolves the firm if at least half of the remaining partners choose to wind it up within 90 days; otherwise the business and the buyout obligation both continue.

What changes the outcome, dramatically, is whether a buy-sell agreement already set the price and the funding before anyone died. Without one, the surviving partners owe the estate money they may not have, on a timeline the statute sets rather than one anybody chose. With one, the timeline and the price are already decided, and the only question is whether it was funded.

Without an agreement: what the estate is owed and when

The statutory timeline after a partner's death, with no buy-sell agreement

  1. Date of death
    Automatic dissociation

    The deceased partner is dissociated by operation of law (section 601(7)(i)). Interest on the eventual buyout price begins running from this date.

  2. Within 90 days (term partnerships only)
    Remaining partners decide whether to wind up

    In a partnership for a fixed term or project, at least half of the surviving partners must elect to wind up within 90 days, or the business continues with a buyout owed to the estate instead.

  3. Whenever the estate makes written demand
    The 120-day clock starts

    The partnership has 120 days from a written demand for payment to agree a price with the estate's representative, or else pay its own good-faith estimate of the buyout price (section 701(e)).

  4. At payment, or after
    Buyout paid, with interest from the date of death

    The estate receives the greater of liquidation value or going-concern value without the deceased partner, plus interest accrued since the date of death, less anything the deceased partner owed the partnership.

  5. Ongoing
    The estate's own exposure

    The deceased partner's estate remains liable for that partner's share of partnership obligations that come due after death, including amounts the estate must contribute under section 807(e) if the business is later wound up at a loss.

The estate's representative steps into the deceased partner's right to partnership information under section 403, which matters in practice: an estate cannot evaluate whether a buyout offer is fair without seeing the books, and the surviving partners are obligated to provide access the same way they would have to the partner directly. A surviving partner who stalls on both the books and the buyout is creating the kind of dispute covered in business partner stealing from the business, even where nothing was actually taken.

With a buy-sell agreement: the same event, a known outcome

A buy-sell agreement replaces the statutory default with a price the partners agreed to while everyone was healthy, funded in advance, usually with life insurance on each partner payable to the business or to the other partners. Death triggers the agreement's own mechanism rather than a negotiation under time pressure: the insurance pays out, the payout funds the purchase at the price (or formula) the agreement already set, and the estate receives cash in weeks rather than after a 120-day demand process and a possible dispute over valuation.

Writing one before anyone needs it is the entire point, and buy-sell agreement for business partners covers the drafting choices (cross-purchase versus entity redemption, how much insurance each structure needs, and what the 2024 Connelly decision changed for funding a redemption with the company's own life insurance). The exit clause itself, including what happens if insurance was never put in place or lapses, belongs in the partnership agreement; writing a partnership exit clause before you sign covers that drafting.

The LLC difference

An LLC member's death does not carry section 701's automatic buyout right. Under the harmonized uniform LLC act, the member's interest passes to the estate as a transferable interest only: the estate can receive distributions if and when the LLC makes them, but has no vote, no right to participate in management, and no statutory deadline forcing anyone to buy it out. Without a buyout clause in the operating agreement, a deceased member's heirs can be left holding an illiquid, non-voting stake in a company run entirely by people who are not accountable to them for a sale. This is one of the clearest cases where an LLC's flexibility, with nothing added to the operating agreement, works against the people least able to negotiate: an estate dealing with a death, not a business dispute.

Disability is the harder case

Death is at least unambiguous. Disability is not: an agreement has to define what counts (total and permanent incapacity to perform the partner's duties, typically certified by a physician, after a waiting period often six months to a year), because a partner recovering from surgery is not the same event as a partner who can never return to the business. A buy-sell agreement that is funded for death and silent on disability leaves the healthier partners carrying a disabled partner's share of the work indefinitely, with no trigger to buy them out, or facing the opposite problem: being forced to buy out a partner who was going to recover in six months.

Disability buyout insurance, a separate product from life insurance, funds this specifically, paying out after the defined waiting period if the disability is still in place. An agreement that only addresses death and skips disability has addressed the easier of the two problems. This is general information, not legal, tax, or insurance advice; the buy-sell agreement, the insurance that funds it, and what a specific estate is owed under the partners' own state law should be reviewed by a lawyer before anyone needs them, which by definition is before any of this happens.