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We are two cofounders with unequal shares in our startup (70/30). If something happened to one of us (death), how are the shares handled in a will?

Does the surviving cofounder have to pay current value to the beneficiary to get them? Or is there insurance we should take out?

Looking for the simplest solution.

Thanks in advance.

J

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2 Answers

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how are the shares handled in a will?

Will is a legal document that defines how to deal with the property of the deceased. Asking how the shares are handled in a will is redundant. They're handled as prescribed by the deceased.

If there's no will, then they're handled based on the local inheritance laws and transferred to heirs with all the rest of the property.

Does the surviving cofounder have to pay current value to the beneficiary to get them?

Doesn't have to, but if he wants to get them - then yes.

Or is there insurance we should take out?

What this has to do with anything? Totally irrelevant and has no bearing on the question of shares inheritance.

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Insurance question isn't relevant to the question, but its often common for partners to have life insurance policies on each other. In case of death that money is used to pay their spouse or whoever the beneficiary would be for the ownership shares. Not relevant to the question, but he may have been told something like this at some point. <- This is common and recommended. – Ryan Doom Jan 30 at 4:06
@Ryan it is common for companies to issue life insurances on their employees in general, its not something special. And these insurances pay to the companies, and beneficiaries see nothing from it, just so you know. – littleadv Jan 30 at 5:40
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If you're worried about this, you might look into the concept of "Right of First Refusal."

Basically, it means that you get an opportunity to match any offer made and in the case of equal offers, you win automatically. It doesn't force a sale, it just gives you the opportunity to match the offer. It also doesn't force you to buy it, you could decline.

It's pretty common among companies who haven't gone public to prevent shares from getting out into the wild without their knowledge.

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