One of the advantages of forming a limited liability company (LLC) is the flexibility of this business structure. In Florida, you can either form an LLC with a sole member or multiple members. What happens to a single-member LLC if the owner dies in Florida? Read on to find out.
What Happens to a Florida Single-Member LLC if the Owner Dies? – In Detail
Florida Statutes §605.0602 (7)(a) expressly provides that a member of an LLC is immediately dissociated from the business entity upon death. The decedent’s estate loses ownership interest while retaining an economic interest in the company.
This type of situation can be complex when it comes to a single-member LLC, as the business entity has no partners to inherit the decedent’s ownership interest.
In such cases, the first step is to review the LLC’s operating agreement. This document is the core element of the company, as it sets specific rules and procedures for different scenarios. Without an operating agreement, the company must follow the default statutory provisions in state law.
Unless a single-member LLC’s operating agreement states otherwise, Florida law grants the decedent’s estate 90 days to elect a replacement.
Please note that the LLC remains “leaderless” until the estate elects a replacement. If the sole member died with contracts to negotiate or any business-related issues to address, nothing will be solved until an appropriate replacement’s election.
Additionally, it may be hard to find someone skilled, available, or willing to replace the decedent’s sole membership depending on the nature of the activities developed by the LLC.
If the decedent’s estate does not manage to find a successor within the 90-day deadline, the single-member LLC is dissolved and cannot be reinstated.
What Happens to a Florida Single-Member LLC if the Owner Dies? – Feasible Solutions
If you are the sole owner of a single-member LLC, the first document on your priority list is the operating agreement. A well-drafted operating agreement with proper language can avoid the 90-day hiatus and ensure a smooth succession process.
With the help of an expert attorney, you can tailor the terms and clauses of a single member’s LLC operating agreement to:
- Transfer the sole member’s ownership rights to the estate upon death
- Direct the transfer of ownership to a beneficiary outside of probate court
- Name a business successor
- Transfer the sole member’s interest into a trust
- Name a non-economic member to preserve the entity’s status as a disregarded entity with the IRS
If the sole member’s ownership is transferred to the estate, it must go through probate before the rightful beneficiaries can inherit it. The best alternative to avoid probate is to direct the transfer to a designated beneficiary.
Since 2015, a decision from Florida’s Fourth District Court of Appeal allows LLC members to enter a transfer-on-death clause in the operating agreement to avoid probate and preserve the business operations from interruptions.
Another solution would be signing on a “springing member.” The person or entity chosen has no initial stake in the LLC due to the company’s sole member status. Upon the original member’s death, the decedent’s economic interest vests the person or entity chosen as a springing member.
Optimized Strategies for Single-Member LLCs in Florida – Immediately Contact Jurado & Associates, P.A.
A well-versed lawyer from Jurado & Associates, P.A. is willing to find an ideal estate planning strategy to preserve your legacy in Florida. Call us today at (305) 921-0976 or email [email protected] for expert legal guidance.