All partnership businesses involve the participation of two or more people to run an enterprise and share its profits. The main advantage of a partnership is that all partners can combine their resources to help grow the business – something a sole proprietorship can’t do.
But what happens to those resources and assets if a partner dies? If you’re a partner in an enterprise and one of your copartners dies, can you and the other surviving copartners use the late partner’s properties?
Partnership property is only for business
Per North Carolina law, when a partner dies, the surviving partners must first make settlements. They’ll have to give a bond payable to the state and must settle the late partner’s prorated debts with creditors. Surviving partners can also apply to buy the deceased partner’s interest in the partnership’s assets, with the approval of the superior court of the county where the partnership existed.
But the law also clearly states that surviving partners have no right to possess any partnership property for any other purpose than for the partnership. This means that if a surviving partner buys the late partner’s interest in the business’s assets, the purchase must be used only for the partnership business and nothing else.
Converting a deceased partner’s assets is embezzlement
If a surviving partner intentionally converts any property, cash or effects belonging to the partnership for their use or refuses to settle their late copartner’s debts, they can face a criminal charge for embezzlement by surviving partner.
Embezzlement by surviving partner is a Class H felony if the assets illegally converted have a value of less than $100,000. The penalties on conviction include a maximum of three years of prison time.
However, if the assets illegally converted were equal to or greater than $100,000, the offense is a Class C felony. The punishment for a Class C conviction is up to 19 years in prison.
There are state-mandated rules that dictate what should happen if a copartner dies. Deviating from those rules and misappropriating partnership assets is embezzlement, even if the dead copartner has no successors to take on their share of the business. If you are facing charges for allegedly misusing partnership assets following a copartner’s death, consider consulting a legal professional to understand your situation better.