Death of LLC Member Florida: Everything You Need to Know
The death of LLC member Florida can have consequences for your company. If this happens, their family members will inherit the legal interest of the business.3 min read
The death of LLC member Florida can cause serious ramifications for your company.
Specifically, in Florida, should a member of an LLC pass away, their family members (or other designated heirs) inherit the legal interest of the business. It is worth noting, however, that this procedure may be different in different states.
Problems That May Arise
Obviously, this is not an issue if the business in question is a sole proprietorship, but in the case of a company that has multiple partners, the death of one of the partners can potentially create issues if things had not already been considered. Among them may be:
- Not wanting to be in business with your deceased partners family members or heirs.
- Any verbal or unwritten agreements that you had with your late partner may not be known or recognized by the family members.
- The family members (now business partners) may not have the same skills or expertise to contribute to the business.
Additionally, should the LLC be a sole proprietorship, there are also problems that may arise, upon someone’s passing. As such, if you are engaged in a business in which you are the only person running the show, you will want to consider the future of your company, in the event of your passing. Otherwise, some of the following could prove to be problematic:
- Is there a family member whom you can entrust to run the business to what your wishes would be?
- If you do not have, in writing, a designated individual to whom your company can be bequeathed, then there is a chance that the business may fold, upon your passing.
- In Florida, it is not assumed that the legal beneficiaries get to “cash out” upon the death of a sole business owner in an LLC without the proper legal documents in place. As such, your family members may not be able to inherit the financial benefits of your hard work.
Fortunately, there are solutions you can look at to protect yourself and your company. The most common of these is having a buy-sell agreement in place between the various business partners that is funded by a life insurance policy.
This can be a good way of ensuring the family members of the deceased are benefitting financially while protecting the future profits and business interests of the remaining partners. In Florida, the buy-sell agreement dictates that one of the other business partners (or, someone else who is keenly familiar with the company, such as a chief employee) will purchase the shares once held by the now-deceased member. Whether the other business partner is not interested in doing business with the family members or you are not interested in taking part in the business, this buy-sell agreement allows for the surviving family members to not get involved with the business dealings of the deceased.
Obviously, with anything regarding a business and its partnerships or professional relationships, having things in written legal documentation is always best practice. While verbal agreements may be recognized by law, they are quite difficult to uphold in court, as it is nearly impossible to verify their existence or the specifics of the agreement. By having an operating agreement in place, it can provide assurances that everyone, and the company as a whole, is being protected upon someone’s passing.
The value of the shares held by the business partners should be spelled out in the operating agreement so appropriate coverage can be provided by the life insurance policy. Many LLC members, when looking into implementing an operating agreement, will rely on the services of an outside appraiser to ensure the value being placed on the shares is both fair and accurate. Best practice is often seen as obtaining three different quotes, then selecting the one that provides the best value of the shares and best value of the life insurance policy.
The death of an LLC member is not the only circumstance which should be considered regarding the longevity of your company. What if a member decides to retire or becomes disabled and unable to work? Certainly, none of these are situations people want to talk about, and many business owners make the mistake of brushing them under the carpet. However, for the sake of your company's well-being, put protocols in place to address various life events.
If you need help with the death of an LLC member in Florida, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.