The Death of an LLC Member in Florida

What Happens After the Death of an LLC Member in Florida?

Under Florida law, LLC members are immediately dissociated from the company upon their death. Much like a voluntary dissociation, this means that the member (or in this case, the member’s estate) loses their ownership in the company while retaining their economic interests. What happens next depends on how many members are in the LLC — did the deceased have any partners, or were they the sole member? — and on whether or not the LLC has a well-drafted operating agreement. An operating agreement sets the rules for your LLC. Without one, you’ll have to follow the default statutes prescribed by the state of Florida. These de facto provisions can result in less than ideal outcomes, especially for single-member LLCs.

Death in Florida Multi-Member LLCs

When handling a member’s death in a multi-member Florida LLC that doesn’t have an operating agreement in place, a couple of different things take place. First, the deceased member’s economic interests in the company will transfer to their estate. Then, the rights to those economic interests are inherited by any beneficiaries named in their Last Will and Testament. Next, their ownership and management rights are evenly distributed among the surviving members. In other words, even though any beneficiaries are entitled to the fruits of the deceased’s labor, they won’t have the right to take their place as a managing member of the LLC. 

Death in Florida Single-Member LLCs

When the sole owner of a single-member LLC dies, they obviously have no partners to inherit their ownership interest. This can throw the business’s entire future into question. In Florida, the deceased’s estate has 90 days to elect a replacement unless otherwise provided for in the company’s operating agreement. Until that replacement has been found, however, the LLC will be suspended in a leaderless purgatory. This can be a problem if there are contracts to negotiate or employee issues to address.  If no successor is found in those 90 days, then the LLC is dissolved and cannot be reinstated. 

Useful Operating Agreement Provisions

There are several different provisions that you can include in your LLC’s operating agreement to prevent further hardship after the death of an LLC member in Florida, such as:

• Transferring ownership and management rights to an estate upon the death of an LLC member in Florida. 
• Naming a specific successor, perhaps either a family member or a key employee. 
• Placing the member’s interest in the company into a trust. 
• Signing on a “springing member,” which is an individual or entity that has no initial stake in the company, but takes over its economic interests in the event of the original member’s death or bankruptcy. 
• Naming a non-economic member to help preserve the LLC’s status as a disregarded entity for tax purposes. 

A lawyer-drafted Operating Agreement goes a long way to protecting a business after the death of an LLC member in Florida. To order yours today, or to have a previously drafted Operating Agreement reviewed by one of our business attorneys, visit us online or give us a call at (727) 279-5037.

Image by Free-Photos on Pixabay.