Sole Proprietorship

The business entity terminates at the death of the proprietor or if the proprietor becomes unable to manage it.



General partnerships and limited liability partnerships under the Revised Uniform Partnership Act (RUPA) do NOT automatically cease to exist when a partner dies or otherwise withdraws from a partnership. The partnership continues, unless certain other events occur. A limited partnership does not terminate when a limited partner dies or becomes disabled. The limited partner’s interest may be assigned, and if the limited partner dies, his or her legal representative may exercise all the partner’s rights for purposes of settling the estate.



A corporation is a separate legal entity, and therefore the death, disability or withdrawal of an owner has no legal effect on the business entity’s existence. As a practical matter, however, many small businesses depend heavily on the efforts of one or two individuals, and the death or disability of one of those key individuals can seriously impair the economic viability of the business. For this reason, a small business corporation, like a partnership, often will obtain life insurance on key shareholder-employees. The articles of incorporation or a buy-sell or shareholder agreement may restrict the transferability of stock in order to retain control of the firm by the remaining key individuals.


Limited Liability Company

Limited liability companies governed by the new Minnesota Revised Uniform Limited Liability Company Act will not dissolve upon the termination of membership of a particular member unless specified in the operating agreement (or articles of organization) or, once a member has been admitted 90 consecutive days pass during which the limited liability company has no members. Otherwise, the termination of a member’s interest does not affect the existence of the limited liability company.

CREDITS: This is an excerpt from A Guide to Starting a Business in Minnesota, provided by the Minnesota Department of Employment and Economic Development, Small Business Assistance Office, Thirty-sixth Edition, January 2018, written by Charles A. Schaffer, Madeline Harris, Mark Simmer, and Melody Randle. Copies are available without charge from the Minnesota Department of Employment and Economic Development, Small Business Assistance Office.


If you need a Minnesota business attorney or have questions, schedule a free call today!