Valuation Of Stock Upon The Demise Of A Partner

When one partner in a partnership passes away, his partnership is in essence, terminated. The remaining partners then have two options; either that of co-opting the deceased’s heirs into the partnership (with the consent of the heirs) or that of paying them out for the deceased’s share in the partnership.

In the latter case, it will mean that the remaining partners will be purchasing the deceased’s share from his heirs. As this will be a purchase transaction, the heirs have the right to sell their shares (in the stock and fixtures and fittings) to the remaining partners at a mutually agreed price which they deem as appropriate. It does not necessarily have to be the present retail, wholesale or original cost price of the assets, but of course the price should be fair and reasonable.

As a guideline (when selling their shares), the market value of the goods could be taken into consideration when doing a valuation. This is the approximate price that the goods can fetch if sold on the market at present. As it is a general retail business, the retail market value should be considered. The valuation of two expert valuators in the field may be considered when doing a valuation in this regard.