I own an LLC with my brothers. What happens to our business when one of us dies?
Generally, business interests are transferred to the deceased individual’s beneficiaries, along with the entirety of their estate, in accordance with a Last Will and Testament, or, if the individual dies without a will, in accordance with the state’s intestacy laws.
In the case of an LLC, the company’s Operating Agreement oftentimes alters this general rule, governing what interests, if any, the deceased member may transfer. For instance, the Operating Agreement may allow a beneficiary the right to receive profits while limiting their involvement in management. Alternatively, the Agreement may prevent the transfer of interest altogether, requiring a buy-out of the deceased member’s holdings.
If you are unsure of the terms in your Company’s Operating Agreement, it is important to take time to review. An attorney can explain the current terms of your Agreement and determine whether revisions are needed to adequately address the members’ wishes and to ensure the uninterrupted continuation of your Company.