When the majority owner of an LLC dies...

[AJSimon]

How is an existing LLC dealt with when its majority owner dies? Assume there's no will in place, or at least nothing outlining how this specific asset is handled. If the 90% owner of the LLC dies, can the remaining 10% owner assume full control, or at least do so by jumping through a few hoops?

[disneysteve]

Does an LLC have any type of partnership agreement that spells out what happens when one party dies? If not, that controlling interest could pass to the estate, though if there was no will that would be even more complicated. So many messes like this could be easily avoided with some simple forethought.

I doubt the 10% partner just inherits the company unless that is spelled out in the business paperwork.

[AJSimon]

Thanks - to you or anyone else - does receiving a K1 form for tax purposes stand as proof that the recipient is an LLC member?

[disneysteve]

I meant to say this in my first response but you definitely need to consult your tax professional and probably your attorney on this. None of us strangers on the internet can really give you a meaningful answer. Someone needs to review the business paperwork, preferably the attorney who drew it all up originally if still available. Death of a partner should have been addressed in the original documents.

[kork13]

In most all cases (unless there's legal documentation from the majority owner directing succession otherwise), their ownership in the LLC would pass to the person's estate. If there's no will, then it will definitely be messy. If the minority owner wants to assume full control of the LLC, he/she would have to buy out the estate's ownership stake in the LLC, and that purchase would almost certainly have to be approved by the probate court, or at least the estate's executor.

[myrdale]

Does the majority owner have a wife or kids?

I'd assume the surviving spouse would inherit the majority owner's 90%, then the kids would split it after that.

Are you related to the majority owner?

I'd be a really interesting case if your dad started a company, and you bought in at 10%, then after years of work he dies, and the siblings who had nothing to do with it want their piece. But keep in mind, say you had two brothers, you too would presumably get a piece of dad's part. So 30, 30, and 30+10, you would be the majority owner if it were split in that way.

[Like2Plan]

I would think if someone went to the trouble of setting up an LLC, there would be a death clause that would address what would happen. It could have a transfer on death provision.

Here’s a link I found regarding finding a copy of the LLC agreement:

https://smallbusiness.chron.com/obtain-copy-llc-operating-agreement-50584.html

[AJSimon]

I would think if someone went to the trouble of setting up an LLC, there would be a death clause that would address what would happen. It could have a transfer on death provision.

Here’s a link I found regarding finding a copy of the LLC agreement:
https://smallbusiness.chron.com/obta...ent-50584.html

In my own research, at least as far as California is concerned, it appears that an LLC operating agreement need not exist in written form. Which seems like a supremely goofy way of allowing things to run.

[Like2Plan]

In my own research, at least as far as California is concerned, it appears that an LLC operating agreement need not exist in written form. Which seems like a supremely goofy way of allowing things to run.

Yes, that does seem goofy. I wonder how that would hold up in a legal setting?

[disneysteve]

In my own research, at least as far as California is concerned, it appears that an LLC operating agreement need not exist in written form. Which seems like a supremely goofy way of allowing things to run.

So you can just wake up one day and call yourself an LLC with no paperwork to back that up? That doesn't make sense at all.

[Like2Plan]

https://bizfileonline.sos.ca.gov/search/business

https://www.legalzoom.com/articles/how-to-start-an-llc-in-california#

[AJSimon]

So you can just wake up one day and call yourself an LLC with no paperwork to back that up? That doesn't make sense at all.

No, my understanding is that you need to register your LLC with the state, but that the operating agreement need not exist in written form.

I

[anhtuvp]

Without a will, it depends on the LLC's operating agreement or state laws. The remaining owner might not automatically gain full control. Legal advice is key here.