234 Planning and Forecasting
time to cash in on their efforts as founders and promoters. The survival of the
business as a whole in the form of a separate entity must be distinguished from
the survival of the business’s individual assets and liabilities.
Sole Proprietorships
Although a sole proprietorship does not survive the death of its owner, its indi-
vidual assets and liabilities do. In Phil’s case, for example, to the extent that
these assets consist of the computer program, filing cabinets, and the like, they
would all be inherited by Phil’s heirs, who could then choose to continue the
business or liquidate the assets as they pleased. Should they decide to continue
the business, they would then have the same choices of business form which
confront any entrepreneur. However, if Phil’s major asset were a government
license, qualification as an approved government supplier, or a contract with a
software publisher, the ability of the heirs to carry on the business might be
entirely dependent upon the assignability of these items. If the publishing con-
tract is not assignable, Phil’s death may terminate the business’s major asset. If
the business had operated as a corporation, Phil’s death would likely have been
irrelevant (other than to him); the corporation, not Phil, would have been party
to the contract.
Partnerships
Consistent with the general partnership’s status as a collection of individuals,
not an entity separate from its owners, a partnership is deemed dissolved upon
the death, incapacity, bankruptcy, resignation, or expulsion of a partner. This
is true even if a partner ’s resignation violates the express terms of the partner-
ship agreement. Those assets of the partnership that may be assigned devolve
to those partners who are entitled to ownership, pursuant to the rules of ten-
ancy in partnership. These rules favor the remaining partners if the former
partner has died, become incapacitated or bankrupt, been expelled, or re-
signed in violation of the partnership agreement. If the ex-partner resigned
without violating the underlying agreement, she or he retains ownership rights
under tenancy in partnership. Those who thus retain ownership may continue
the business as a new partnership, corporation, or LLC with the same or new
partners and investors or may liquidate the assets at their discretion. The sole
right of any partner who has forfeited direct ownership rights is to be paid
a dissolution distribution after the partnership’s liabilities have been paid or
provided for.
Corporations
Corporations, in contrast, normally enjoy perpetual life. Unless the charter
contains a stated dissolution date (extremely rare), and as long as the corpora-
tion pays its annual fees to the state, it will go on until and unless it is voted out