Lisa and the Law

Follow the advice of your professional team

This is a true story. An LLC was formed by 2 owners (members). One member held a 96% membership interest and the other held a 4% interest. The majority member died suddenly. There was no plan in place. The majority member had a living trust, but never transferred his percent ownership interest to the trust and the members never updated their Operating Agreement to appoint a new manager in the event the majority member could no longer serve. Side note: the members had a new Operating Agreement drafted but they never signed it. Minority member (who was intended only to be an investor and not a manager) took over the management of the LLC. Majority member’s ownership interest in the LLC must be probated so even though he had a trust it does not automatically pass the ownership of the LLC to the beneficiaries (which is worth millions). It is critical to ensure that your business has a succession plan to ensure that your wishes are upheld if you (the business owner) die and you do not leave a mess for your loved ones.