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Under the Partnership Act 1890, a general partnership is automatically dissolved when a partner dies — unless the partnership deed contains specific continuation provisions. Most modern partnership agreements do include such provisions, allowing the partnership to continue without dissolution. If there is no deed, the default position under the 1890 Act applies: dissolution and winding up. LLP members are governed by their LLP Agreement, not the Partnership Act, and have much greater flexibility.
The death of a business partner is both a personal bereavement and a potential business crisis. What happens next depends almost entirely on what is written in the partnership deed — or, if there is no deed, on default legislation that may produce results nobody wanted. This guide explains the legal position and the practical steps for surviving partners and executors.
The Partnership Act 1890 is the statute that governs general partnerships where there is no written partnership agreement (or where the agreement does not address a particular situation). It extends to the whole of the United Kingdom, though not identically: section 4(2) provides that in Scotland a firm is a legal person distinct from the partners of whom it is composed, which English law does not. The Act's default position on the death of a partner is stark: the partnership is dissolved.
Section 33(1) of the Partnership Act 1890 provides that, "subject to any agreement between the partners, every partnership is dissolved as regards all the partners by the death or bankruptcy of any partner". Dissolution does not mean the business immediately ceases — it means the partnership enters a winding-up process. The business continues only for the purposes of winding up: completing work in progress, collecting debts, paying creditors, and distributing the surplus to partners (or their estates).
This default position is often not what anyone actually wants — surviving partners typically want to continue the business without disruption. A partnership deed is what displaces it, which is why the deed is the first document to find. In the absence of a deed, the surviving partners and the personal representative of the deceased partner have to reach agreement on how to proceed, which can be time-consuming and contentious.
If the partnership is dissolved, the surviving partners are entitled to carry on the business to wind it up, but not to take new partners or expand the business. On liability, section 9 of the 1890 Act is precise: every partner is liable jointly with the other partners — and in Scotland severally also — for debts and obligations incurred while a partner; and after a partner's death their estate is also severally liable, in a due course of administration, for those debts so far as they remain unsatisfied, subject in England to the prior payment of that partner's own separate debts.
Most professional partnerships and any partnership that has sought legal advice on its structure will have a written partnership deed that contains specific provisions for what happens on the death of a partner. These typically include:
The first step for any surviving partner is to locate and read the partnership deed. An old deed still governs, even if it no longer reflects what the partners would say they intended, so its actual wording is what matters. Where a clause is genuinely ambiguous — a valuation formula, or whether goodwill is included — the interpretation is a legal question, and partnership law is a specialist field.
Important:
If you cannot locate the partnership deed, check with the solicitors who set the partnership up and with the accountant. A general partnership is not registered anywhere and its deed is never filed publicly — only limited partnerships and LLPs appear at Companies House, and even then the agreement itself is not filed. A deed in force at the date of death governs the position even if it pre-dates the death by many years and has never been updated.
The deceased partner's share in the partnership passes to their estate. In a partnership (unlike a limited company), there are no shares — instead, the partner had a capital account (reflecting their net investment in the business) and an income account (reflecting their share of profits and drawings). Together, these represent their economic interest in the partnership.
The valuation of this interest is typically the most contentious issue between the estate and surviving partners. The key components are:
The deed usually says how the valuation is to be done. Where it does not, or where the mechanism has broken down, the interest is normally valued by an independent accountant or business valuer — either a single joint expert instructed by both sides, or, if that cannot be agreed, one for the surviving partners and one for the estate.
LLPs (formed under the Limited Liability Partnerships Act 2000) are governed by their LLP Agreement rather than the Partnership Act 1890. The LLP itself is a separate legal entity — like a company — and does not automatically dissolve when a member dies. This gives LLPs significantly more flexibility than general partnerships when dealing with the death of a member.
The LLP Agreement will typically govern what happens to the deceased member's membership interest on death. Common provisions include:
Professional LLPs (law firms, accounting practices) often have detailed succession provisions in their LLP Agreements, including arrangements for the purchase of the deceased member's share through an insurance-funded buy-out. As with a partnership deed, the LLP Agreement's actual wording governs. Where an LLP has no written agreement, default provisions in the Limited Liability Partnerships Regulations 2001 apply instead.
Goodwill is often the most valuable asset in a professional partnership — particularly for solicitors, accountants, surveyors, and other established professional practices. The treatment of goodwill on a partner's death has both legal and tax implications.
For IHT purposes, the deceased partner's share of goodwill is an asset of the estate and must be valued at the date of death. Business Relief may reduce the charge. GOV.UK lists "a business or interest in a business" — which covers a partnership share — as qualifying for 100% relief, and says relief is not available where the business mainly deals in securities, stocks or shares, land or buildings, or in making or holding investments. The deceased must have owned the business or asset for at least two years before death.
The relief is no longer unlimited. For deaths on or after 6 April 2026, GOV.UK states that 100% relief is capped at a £2.5 million allowance for qualifying business or agricultural property taken together, with 50% relief on qualifying property above that allowance. Any unused allowance can be transferred from a spouse or civil partner who died earlier, which can take the available allowance up to £5 million; that transferred allowance must be claimed by the later of four years after the death and six months after taking on the role of executor or administrator. In a professional practice with a substantial goodwill value, this cap is the number that decides whether there is an IHT bill at all.
For the surviving partners, paying goodwill to the estate is treated as a capital payment. If the buy-out is financed over time, the payments are typically treated as capital rather than income in the hands of the estate. The tax treatment of goodwill payments is technical, and where goodwill values are substantial the amounts turning on it are large enough that most estates take specialist tax advice on it.
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