Death of LLC Owner/Member-Transfer of LLC Interest

I offer choices for the LLC Operating Agreement concerning the transfer of LLC interests should an LLC owner/member die. The choices are, should the deceased’s LLC interest 1) be transferred to heirs, 2) be sold to any purchaser, or 3) be purchased by the LLC.

If the matter is not addressed in the LLC Operating Agreement, the South Carolina Statutory Default Rules control and the LLC interest will be sold to any purchaser.

Clients are asked their preferences in the Pre-Organization Questionnaire Letter. I also discuss this provision in the Attorney Letter that accompanies the draft LLC Operating Agreement to the clients. I remind clients if the interest is to pass through bequest that they should have wills. If the LLC has elected Sub S tax treatment, I warn in both the LLC Operating Agreement and the Attorney Letter that clients must consider S-Corp restrictions on ownership in terms of who their heir will be.

When I organized “Form” LLCs, I did not offer options on this matter.

“No, ‘tis not so deep as a well, nor so wide as a church door; but ‘tis enough, ‘twill serve.” William Shakespeare, Romeo and Juliet, Act III. Scene I. Lines 100 - 101.