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Written by : Ahmed Siemon |
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hi this is Dan Smith of DPS legal counsel welcome to today's video today I want to talk about single member LLC's and what happens when the sole owner of the LLC dies and what you should do if you are the owner of a single member LLC in Tennessee to take into account the issues that might arise upon your death in order to preserve your business for your family and so here's the situation let's say that one man or one woman owns a single member LLC that person is the sole owner has all the economic interest in the LLC and also all the government's interest in the LLC if that person dies what happens to the LLC well under the Tennessee statute the revised limited liability company Act the an event that results in there being no members in the LLC which would occur upon the death of the sole member typically would require the dissolution of the LLC but there's an exception to that rule with respect to the death of a single member in a single member LLC the rule is under the statute if a sole member of an LLC dies and if the operating agreement of the entity does not require the dissolution of the LLC and if the personal representative of the deceased soul member doesn't file a notice of dissolution of the LLC that the that the LLC will continue after the death of the sole member and the personal representative of the sole member is automatically substituted as the member of the LLC in place of the deceased member effective as of the date of the deceased members death so to summarize if you have a soul member LLC and the soul member dies the and if the operating agreement is either silent as to what happens upon the death the soul member or it does not require the dissolution of the LLC upon the death of the soul member then the the LLC will continue with the personal representative in other words the executor of the estate of the sole member becoming automatically substituted as the member of the LLC effective as of the date of death of the soul member now this can still be an issue for a company you may not wish to have your personal representative become the sole member of your LLC upon your death and in addition it sometimes takes a bit of time for the person whom you name as executor of your estate to be to become the executor of your estate to be appointed executor by the probate court and so even though the membership interest of the personal representative would relate back to your date of death there's a period of time after after death and before the probate court appoints the executor that things are a little bit in limbo because the personal representative hasn't been appointed who's the member there is no member who runs the company it's unclear and uncertain and you don't want lack of clarity or uncertainty with respect to the operation of your business after you die so what can you do to avoid that issue number one the main thing you can do is to provide in your operating agreement for your LLC what happens when you die if you're the sole member who becomes a member who becomes the manager who runs the LLC you need to be clear in your operating agreement as to what happens upon your death you may want to go ahead and say that a particular family member or particular family members plural become members of the LLC automatically in your place upon your death and give them the right not only to the economic interest in the LLC but also the government's rights in the LLC or you may want to appoint someone or some group of people to govern or to have the governance rights in the LLC at your death and give the economic interest in the in the business to other people you may have family members that you want to share in the economic rights in the company but you don't want them involved in the day-to-day running of the business but the main thing is you need to be clear in your operating agreement what happens to the governance rights and to the economic rights of your business when you die otherwise you're going to have this situation where after your death but before your executor is appointed there is a period of time when no one is running the show and no one is really in your place as the member of the business even though the executor under the statute would automatically become a member effective as of your death there is a period of time after death but before appointment of the executor when no one is there to act on behalf of the company and it may be that you'd really don't want these that your executor to be running the show for your company anyway so the key takeaway is if you run a small business and you're the sole owner make it clear make it crystal clear in your operating agreement what happens upon your death name people a person will people and you that are would be your beneficiaries or whomever to step in as automatic members upon your death make sure if you want them run the show that it's clear that they have not only the economic interest but the governance rights and if you want to split the governance rights from the economic interest make clear who you want to govern or have the governance rights in your LLC upon your death apart from the economic interest it's very important that you take a close look at your operating agreement if you're a sole member LLC before your death so that there's not a problem created after your death with your LLC all right I hope that helps and we'll see you next time
Thanks for your comment Xiomara Furlow, have a nice day.
- Ahmed Siemon, Staff Member
hi everyone eric grotewa epg attorneys at law so what happens if you are a part owner of a florida llc and your partner dies okay this is a real question it happens so the the first thing you look at is what is ownership in an llc well it's considered personal property um so just like this cup is personal property or my clothes or personal property your ownership interest in an llc is personal property and so many llc's have what's called an operating agreement now in the operating agreement it could say in the event of a death of one of the owners xyz is going to happen and that would mean that the ownership injury would pass by right of contract that's just like having a beneficiary designation on an uh life insurance policy or on a bank account or on an investment account um and what that means is that when somebody passes it automatically passes according to the terms of the contract now what if they don't have an operating agreement well that's where we need to look at things like probate in short and i won't do this in this video but probate is bad probate is long probit is expensive so if you have a company please have an operating agreement thank you
Thanks Annice your participation is very much appreciated
- Ahmed Siemon
About the author
I've studied vaccination policy at Gratz College in Melrose Park and I am an expert in sociology of scientific knowledge. I usually feel determined. My previous job was pressing machine operator I held this position for 13 years, I love talking about horseback riding and ballet. Huge fan of David Muir I practice rafting and collect cracker jack prizes.
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