If you are running a single-member limited liability company -- a one member LLC -- you may need to insert a provision in your existing operating agreement that will insure a smooth transfer of ownership to another person or organization after your death. If you die and there is no provision within your single-member LLC's operating agreement for the transfer of your ownership to someone else, your LLC can become an asset of your estate. As such, it may encounter tax and probate problems. Your LLC may be divided among family members, dissolved or sold off to people you did not choose, depending on the laws of the state in which your estate is probated.
Fit your business needs with the right LLC package
Make a list of people and organizations, one of whom might be a suitable new sole owner of your LLC after you pass away.
Call the people and organizations on your list and ask if they are willing to accept and run your LLC or dispose of it after your death.
Visit your state government's tax division website and look for booklets and other information on your state's rules regarding the transfer of an LLC after its owner's death. Check the federal Internal Revenue Service website to see if there are any recent changes in its rules that affect such transfers.
Contact your state Secretary of State's office for a copy of the forms you will need to file an amendment to your original operating agreement, the address where you will need to file the amendment and the amount of the filing fee.
Redraft or create a "Transfer of Ownership" article for the operating agreement. Name the new sole member who will take over the LLC after your death. Identify a second sole member in case the person you designate as the new sole owner is unable to accept the LLC transfer after your death due to disability, death or other problems. Add or revise language providing for the dissolution of your LLC if none of the people or organizations you designate can accept the LLC transfer after your death.
File the amendment to your LLC operating agreement with your state's designated office.
Tips & Warnings
- You may need to consult an estate planning or business lawyer if your LLC's assets are numerous or complicated, such as the ownership of several real estate properties.
- Some estate-planning lawyers prefer that your LLC membership interest be placed in a trust and passed to your chosen successor after your death that way. You would ask your lawyer to create a trust, and the LLC agreement would be amended to refer to the trust.
References & Resources
- FindLaw.com: Limited Liability Corporations Overview
- Internal Revenue Service: Single Member Limited Liability Companies
- Smith and Condeni LLP: Estate Planning and the Limited Liability Company
- Pelzer and Salisbury, LLC: Death of LLC Owner/Member --Transfer of LLC Interest
- LLCC: What Happens When an LLC Member Dies?
- Northwest Registered Agent LLC: Step by Step Guide to New York LLC Amendments
- Ambrecht and Associates: A Single Member LLC May Present Issues for Liability Protection, Bankruptcy, Gift and Estate Taxes, and Employment and Excise Taxes
- TrustBuilders Law Group: Use Of Limited Liability Companies ("LLCs") In Virginia
- Limited Liability Company Center: What Is a Single Member LLC?
- K&L Gates LLP: Common Mistakes and Oversights When Drafting and Reviewing LLC Operating Agreements; Warren P. Kean, J.D.
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