When one of the owners of an LLC passes away, what happens? In this article, you will find the answer. Read on to learn what you need to know about dealing with the death of an LLC member in the State of Florida directly from an experienced Florida Business Lawyer.
When One of the Owners of an LLC Passes Away
Due to the growing popularity of the LLC business structure in the State of Florida, especially in Miami, the laws on LLCs have expanded to preserve the rights of the remaining owners of an LLC that have lost a member as well as the rights of the business entity itself. In other words, the law covers how a Florida LLC should govern itself in the event that one of its owners passes away.
When the Owner of a Single-Member LLC Passes Away
Florida LLCs are business entities that are often used by their owners to separate their personal assets from their business’s assets in order to protect them. This is one of the main reasons why Limited Liability Companies have become so popular amongst individuals who set up single-member LLCs to protect their personal property from liability. However, creating a single-member LLC means the business only has one owner, so what happens when the only member of an LLC dies?
In Florida, if the deceased owner of a single-member LLC did not have an operating agreement that clearly established what was to happen to the company in the event he or she passed away, then their death could lead to the dissolution of the company. However, if an operating agreement that details the inheritance of the LLC’s ownership rights to the owner’s heirs was created when the company was established, then the company may continue to exist.
When One of the Owners of an LLC with Multiple Owners Passes Away
When it comes to LLCs with multiple members, the process of dealing with the death of one of them is different, as there are several routes to choose from. However, it all depends on the LLC’s operating agreement.
In the case of an LLC that has two owners and one of them owns 51% of the company or more, Florida law provides guidance as to what should happen in the event one of the members passes away. Essentially, there are two routes the remaining owner can take when it comes to distributing the deceased member’s shares. First, if the LLC has an operating agreement that shows the ownership rights of the LLC’s members were held with a right of survivorship, then the surviving member gets the deceased member’s shares.
However, in cases where there is no operating agreement or when the operating agreement does not specify whether the members have a right of survivorship, the decedent’s shares become part of their estate, which means they will have to go through Florida probate.
If the deceased owner does not have a will dictating who will inherit the shares, then the State of Florida will determine who will inherit them. Once the shares become part of the deceased owner’s estate, the personal representative can determine whether the remaining members of the LLC can buy the shares from the estate.
Essentially, when one of the owners of an LLC passes away, a complex issue arises if there is no operating agreement in place to provide clarity on how the deceased owner’s shares should be distributed and, most importantly, whether the LLC should continue to operate. In other words, when one of the owners of an LLC passes away, having a bulletproof operating agreement is vital.
Has one of the members of your LLC died? If the answer is yes, then Attorney Romy B. Jurado, Esq. can help you. Give Romy a call today at (305) 921-0976 or send an email to Romy@JuradoLawFirm.com to schedule a consultation.