Does an LLC Really Go Through Probate? – Yes, But Don’t Make This Mistake + FAQs

When a business owner passes away, what happens to their LLC ownership becomes a critical question.

Many people wonder whether a limited liability company (LLC) must go through probate like personal assets do. This article dives into the federal perspective on LLC interests in an estate, then breaks down state-specific nuances in top jurisdictions.

Federal Law and Probate Basics for LLCs

Probate is the court-supervised legal process of settling a deceased person’s estate—validating their will (if any), paying debts, and distributing assets to heirs. Estate administration is largely governed by state law, not federal. There is no unified federal probate system; each state has its own procedures (though many follow similar principles). However, federal law still looms in the background, especially regarding taxation and overarching legal recognition:

• Separate Entity Concept: At the federal level (and universally in U.S. law), an LLC is recognized as a separate legal entity distinct from its owners (members). Unlike a sole proprietorship (which is indistinguishable from the owner), an LLC does not die when the owner dies. This concept is akin to a corporation’s perpetual existence. Federal recognition of LLCs (particularly for tax purposes) treats the company’s assets as belonging to the LLC, not directly to the individual. This means when an owner dies, the LLC’s bank accounts, real estate, or other property remain titled in the LLC’s name and do not become part of the owner’s personal probate estate. In other words, the LLC itself does not go through probate.

• Membership Interest as Personal Property: What does fall into the estate is the deceased owner’s membership interest in the LLC. An LLC membership interest (ownership stake) is personal property under U.S. law. Federal law doesn’t alter this classification—there’s no special federal exemption for LLC interests in probate. If John Doe owns 100% of “Doe LLC,” his LLC interest is an asset he owns, much like stocks or a car. On death, that interest (the rights to profits and control in the LLC) is part of John’s estate. Whether that interest goes through probate will depend on how it’s held and what planning was done (more on that soon).

• Estate and Gift Tax Considerations: While probate itself is state-driven, federal law plays a role in estate taxes. Under federal law, when someone dies, all their property (including LLC interests) is included in their gross estate for tax purposes. As of recent years, estates valued over a certain threshold (e.g. around $12 million in 2025 under current law) may owe federal estate tax. If an LLC interest is significant in value, it can trigger federal estate tax, but careful planning (like valuation discounts for minority interests or lack of marketability) might reduce the taxable value—an advanced strategy often used by estate attorneys. Importantly, federal estate tax and probate are separate: one can owe estate tax even if no probate is required (for example, if all assets were in a trust), and conversely, an estate could go through probate but owe no federal tax if under the exemption.

• Uniform Codes and Federal Influence: There have been nationwide efforts to standardize aspects of probate. The Uniform Probate Code (UPC), first introduced in 1969, provides a model that many states adopted in whole or part to streamline estate administration. Similarly, the Uniform Limited Liability Company Act (ULLCA) and its Revised version (RULLCA, 2006) influenced state LLC laws. These are not federal laws but rather model laws—still, they create some common expectations across states. For example, most states now allow an LLC to continue after a member’s death by default (a shift that happened after the IRS’s 1997 “check-the-box” regulations made LLCs more popular). In the late 1990s, many states revised their LLC statutes to avoid automatic dissolution on a member’s death, favoring continuity unless otherwise decided. This trend, encouraged by uniform laws and federal tax clarity, means that in general an LLC won’t dissolve just because an owner died, but the deceased’s membership interest still must be dealt with under state succession laws.

Key Definition – Probate vs. Non-Probate Assets: It’s crucial to distinguish between assets that must go through probate and those that bypass it:

• Probate assets are those titled solely in the decedent’s name with no designated beneficiary or ownership structure that provides for automatic transfer. These require a court process to transfer title (examples: a house in the decedent’s name alone, a personal bank account with no payable-on-death beneficiary, or an LLC membership interest owned personally with no succession plan).
• Non-probate assets transfer automatically by operation of law or contract at death. Examples include life insurance (pays to a named beneficiary), retirement accounts with designated beneficiaries, joint tenancy property (goes to the surviving joint owner), or assets held in a living trust.

Where does an LLC interest fall? By default, an LLC interest is a probate asset if it’s held in the decedent’s name. Unlike a jointly owned bank account, you typically don’t list a beneficiary when you register an LLC interest (some exceptions in certain states, discussed later). So if no special planning is done, that interest will be subject to probate (the court will oversee its transfer to heirs or the person named in a will). However, there are important strategies and structures that can turn that membership interest into a non-probate asset, which we’ll explore.

How LLC Ownership Is Handled at Death (General Rules)

To understand if an LLC goes through probate, we must look at what happens by default when an LLC owner dies. Federal law doesn’t dictate these mechanics—state LLC statutes and the LLC’s own Operating Agreement (the contract among LLC members) do. Here’s the general framework:

1. The LLC Entity Continues (Usually): One of the benefits of an LLC (like a corporation) is continuity. The death of a member does not typically terminate the LLC’s existence. The LLC can keep operating, entering contracts, and owning property just as before. This is a stark difference from a sole proprietorship: if a sole proprietor dies, there’s legally no business entity left—just assets that fall into the estate. With an LLC, the company’s assets remain company property, and the LLC can, in theory, run indefinitely. Most state laws explicitly state that the LLC is not dissolved by a member’s death unless certain conditions apply. (Historically, earlier LLC laws in the 1990s treated an owner’s death as an event that could dissolve the LLC, similar to a partnership dissolution, but this is no longer the norm in most jurisdictions.)

• Example: If Jane owns 30% of a marketing LLC and passes away, the LLC doesn’t vanish. The LLC still owns its accounts, equipment, and contracts. Jane’s share of profits (and her voting rights) are what’s affected, not the LLC’s legal existence.

2. Membership Interest Passes to the Estate: When a member dies, that person is legally “dissociated” from the LLC. Dissociation means they cease to be a member (no longer able to manage or vote), but it doesn’t destroy their economic rights. The decedent’s personal representative (executor named in a will, or an administrator appointed by the court if no will) essentially steps into the shoes of the deceased member, but only in a limited capacity. The estate now holds the deceased member’s economic rights in the LLC (right to profits, distributions, and the value of the interest).

• Importantly, in many states, management or voting rights do NOT automatically transfer to the heir or estate. The estate may be treated as an assignee of the interest rather than a full member. This means the estate can receive distributions of profits but cannot vote or participate in management unless certain steps are taken. The logic is to prevent an LLC from suddenly having a new decision-maker (heir) that the remaining members never agreed to. Most LLC statutes provide that a new person can become a member only with consent of the remaining members or as provided in the operating agreement.
• Specialist’s nuance: This split between economic rights and membership rights is something many laypeople overlook. In practice, if you leave your LLC interest to your son in your will, he may inherit the value of your LLC interest, but he might not have the right to attend meetings or vote unless the other members (if any) formally admit him as a member. During the probate process, your executor might only have the authority to collect distributions and ultimately transfer the financial interest to your heir.

3. Operating Agreement Provisions: The first place to check for guidance is the LLC’s Operating Agreement (OA) or any Buy-Sell Agreement among owners. These documents often have custom clauses for what happens on an owner’s death. Common provisions include:

• Automatic Transfer to a Named Successor: Some single-member LLC OAs name a successor member or manager who takes over ownership or control upon the owner’s death. This is similar to naming a beneficiary.
• Buy-Sell Agreements: Many multi-member LLCs have buy-sell terms: if a member dies, the LLC or the remaining members are obligated (or have the option) to buy out the deceased member’s interest at a predetermined price or formula. For instance, three partners might agree that if one dies, the others will purchase his share using insurance money. In this scenario, the deceased member’s estate gets cash (which will be distributed via probate or trust to heirs), and the LLC interest is reallocated to the remaining owners or the company.
• Heir Admission Clause: An OA might specify that an heir (say a family member) can be admitted as a member without needing other members’ consent, or it might set conditions (perhaps the heir must meet certain qualifications or agree in writing to the OA terms).
• Dissolution Triggers: Less common now, but some OAs (especially older ones) might say the LLC must dissolve and liquidate on a member’s death unless the others vote to continue. If enforced, that means the LLC’s assets would be sold and the proceeds go to the deceased’s estate (which then is handled in probate).

Opinionated note: In my practice, I’ve seen both well-crafted and poorly-drafted agreements. A well-drafted agreement can save everyone huge headaches by avoiding ambiguity. On the flip side, if there’s no operating agreement or it’s silent on death, the LLC will rely entirely on default state law, which may not align with what the owners would have wanted.

Many small LLCs skip formal operating agreements (especially single-member LLCs where the owner might think “why write an agreement with myself?”). That can be a costly oversight when it comes to probate and succession.

4. Default State Law Kicks In: If the operating agreement doesn’t specify a plan, state LLC law provides default rules:

• In all states, the deceased member’s financial interest (right to profits and distributions) will belong to their estate (and ultimately to heirs/devisees). The estate’s personal representative can usually exercise the member’s rights only for purposes of settling the estate—for instance, collecting any payouts, approving an accounting, or even selling the interest if needed to pay debts.
• For membership/management rights: Typically, the law says the inheritor of the interest is not a full member unless admitted according to whatever process the law or operating agreement provides. Often, this means the remaining members must consent to the transfer of membership rights. If the LLC was single-member, some state laws allow the heir or personal representative to become a new member to continue the company (we’ll discuss specific states soon).
• Many modern statutes use the term that the deceased member’s personal representative may exercise rights of an assignee, including the power to become a member if allowed. In plain English, the executor can step in and do what’s necessary to transfer or maintain the value of the interest, but they don’t automatically get to run the business unless permitted.

5. Probate or No Probate – the Outcome Depends: If the deceased had an estate plan, the LLC interest might avoid probate or at least have a clear path:

• If the interest was held in a Revocable Living Trust, the trust now owns it (no probate needed for that asset).
• If the interest had a designated TOD beneficiary (possible in a few states or via contract), it transfers directly to that beneficiary outside probate.
• If none of the above, and the interest isn’t jointly owned, then probate is usually required for that interest. The probate court (through the executor/administrator) will oversee transferring the membership interest to the new owner (the heir or beneficiary named in a will).
• Even if an operating agreement sets out a sale or transfer, the estate’s involvement typically means the interest (or the sale proceeds from it) go into the estate, which is handled in probate unless a trust or other mechanism intervenes.

6. Business Operations During Probate: A big worry is: “Can the business keep running while all this legal stuff is sorted?” The answer is generally yes, but it can be complicated:

• If there are other members or managers, the LLC can continue operating under their control. For example, if a 4-member LLC loses one member, the other three typically still have full authority to run the company. The deceased member’s vote or approval might not be needed unless it was a supermajority situation, etc.
• If it’s a single-member LLC, hopefully a successor manager was named or the estate’s representative can step in. In some cases, courts may authorize the executor to act to preserve the business (pay employees, manage assets) during the probate process. Some state laws explicitly allow an executor to temporarily manage or wind down a sole owner’s business. Without prior planning, a single-member LLC can face a period of uncertainty — bills might go unpaid or contracts stalled until someone is authorized to act. This is where having a designated second-in-command in your operating agreement or a trust in place is extremely helpful.
• One subtle benefit of having assets in an LLC: if the LLC holds, say, real estate in another state, the decedent’s estate may avoid needing an ancillary probate in that other state. The property is owned by the LLC (a company, not the individual), so you don’t have to open a probate case in the state where the property is located. Only the membership interest (personal property) is handled, usually in the state of the owner’s domicile. This saves time and expense and is a savvy estate planning move for those with out-of-state real estate.

7. Illustrative Scenario (to tie it together):
Imagine Sarah, a sole owner of an LLC that owns a rental property and some investment accounts. If Sarah dies with no estate plan, her LLC membership interest is part of her probate estate. The LLC doesn’t die – it still holds the rental property – but now no one has authority to sign leases or access the LLC’s bank account until the court appoints an executor/administrator. Sarah’s heirs will eventually inherit her LLC interest under state intestacy law (maybe her spouse or children), but that transfer will happen through probate. The court might allow the executor to manage the LLC in the interim (to pay the mortgage on the rental, etc.), but it’s all under oversight. If instead Sarah had placed her LLC interest into a living trust, the successor trustee would instantly have control of the trust (and thus the LLC interest) at her death, and could immediately continue managing the LLC and its property with no court involvement – probate avoided.

Alternatively, had Sarah added a clause in the LLC Operating Agreement naming her daughter as a successor member, the daughter could possibly take over ownership directly, though in practice the daughter might still show the will or agreement to a court to confirm things. The differences in outcome are huge: one path is smooth and private, the other is public and potentially slow.

Why an LLC Interest Might Go Through Probate (Common Scenarios)

Even though an LLC itself doesn’t go to probate court, here are scenarios where the membership interest ends up entangled in probate proceedings:

• No Estate Plan (Intestacy): The owner dies without a will or trust. All their individually owned assets (including any LLC stake) must be distributed under state intestacy laws (which decide heirs, like spouse and children). The probate court will oversee the appointment of an administrator and the eventual transfer of the LLC interest to those heirs. No designated beneficiary means the court process is the only way to pass on the ownership.
• Will but No Avoidance Mechanism: If the owner had a will that says “I leave my LLC interest to my son,” it still has to go through probate. The will just guides who gets it at the end, but the probate court must validate the will and the executor will carry out the transfer. So a will alone doesn’t save the interest from probate; it only directs probate.
• Operating Agreement Silent or Lacking: If the LLC’s governing documents didn’t outline a succession plan, then the default state law (probate and LLC statutes) take over. Many small LLCs either have no formal operating agreement or use a boilerplate one that doesn’t mention death. In such cases, expect the interest to be treated like any other personal property in the estate.
• Disputes Among Survivors: If there’s any fight over who should get the LLC interest or how it should be handled, probate court becomes the arena to resolve it. For example, say the decedent informally promised the business to a key employee, but legally his interest would go to his children. A dispute like that will drag the estate (and the LLC interest) into probate litigation. Or if two heirs both want to control the LLC and the operating agreement isn’t clear, a judge may have to step in.
• Insufficient Planning for Business Debts or Management: Sometimes an LLC interest ends up effectively in probate because the business was so tied to the owner that after death it can’t run without court guidance. For instance, if the decedent was the only one who knew certain passwords or had certain authority, the executor might need court orders to gather info or take control. Or if the business’s value needs to be preserved and sold, the probate court oversees that sale and transfer of the interest (or assets).

From a federal law standpoint, none of these scenarios are dictated by federal statute—they arise from a lack of planning meeting state law defaults. However, federal law might get involved if, say, probate delays lead to issues with federal obligations (imagine the LLC had federal contracts or licenses that need updating, or tax payments due – the estate’s representative might have to work quickly to avoid federal penalties).

Strategies to Keep an LLC Out of Probate (Estate Planning for LLCs)

A savvy business owner can implement strategies so that their LLC membership interest does not have to go through probate at all. These approaches align with general estate planning tactics to make assets “non-probate”. Here are key strategies, with details on how they work for LLCs:

1. Revocable Living Trust: Transfer ownership of the LLC interest to a living trust. You, the owner, are typically the initial trustee and beneficiary, so nothing changes during your life—you still control the LLC. Upon your death (or incapacity), your chosen successor trustee automatically has control per the trust document. The trust, being a legal entity that doesn’t die, continues to own the LLC interest, so there’s no need for probate. This is widely considered one of the best methods to avoid probate for an LLC. Nuance: Make sure the LLC’s operating agreement doesn’t prohibit transfers to a trust (most don’t, especially for a member’s living trust, but it’s good to confirm). Also, remember to actually change the LLC’s membership records to show the trust as the owner (simply drafting a trust isn’t enough—you must assign the interest into the trust).

2. Transfer-on-Death (TOD) Designation: Some states allow you to name a beneficiary for your LLC interest, similar to a TOD designation on a bank or brokerage account. This is not universally available, but it’s a powerful tool where allowed. For example, Ohio treats LLC membership units as “securities” under its law, so an LLC operating agreement in Ohio can include a TOD registration that names a beneficiary. When the owner dies, the interest automatically goes to the named beneficiary, bypassing probate. A handful of other states have adopted similar provisions (often by including LLC interests under their Uniform TOD Security Registration Act or through specific LLC Act clauses). If you operate in one of these states, you can essentially create a beneficiary designation within your LLC documents. Check local law—if permitted, the operating agreement or membership certificate would list “Transfer on Death to [Name].” Little-known fact: Because this transfer is considered contractual (by the LLC agreement) and “not testamentary,” it doesn’t invoke probate or violate any will formalities.

3. Operating Agreement Succession Clause: If you’re in a multi-member LLC, work with your co-owners to include succession planning clauses. For instance, the OA might say “On any member’s death, their personal representative may designate an heir to be admitted as a member, otherwise the company shall buy out the interest.” This way, there’s a predetermined path that can take place largely outside court. The buy-out route often avoids probate wrangling because the estate just gets paid according to the contract—there’s less for a court to decide. The key is that the transfer of ownership is governed by contract and company law, not by a judge dividing assets. (The estate still receives the value, but an agreed process handles it.)

4. Buy-Sell Agreement (with Insurance): A specific kind of agreement, a buy-sell, is common for businesses with multiple owners. All members sign a contract that on death (or other triggering events like disability) the remaining owners or the LLC itself will purchase the deceased’s interest. Often life insurance is used: each owner has a policy that provides cash to buy out their share if they die. This ensures the survivors get the business 100%, and the deceased’s family gets cash instead of a complicated business share. From a probate perspective, this can simplify things: the interest is converted to a cash claim, which might still go through the estate but is straightforward (and often the insurance policy might even pay a trust or directly to the beneficiaries, further avoiding probate). Specialist tip: Structure the buy-sell as a binding contract; the more automatic it is, the less involvement from probate courts. In some cases, the agreement may say the transfer is effective immediately at death, which means the estate’s role is only to receive payment, not to manage or decide anything about the LLC.

5. Joint Ownership (with Rights of Survivorship): This approach is less common for LLCs, but it can happen. If an LLC interest is jointly owned (for example, a husband and wife are both listed as joint members owning one combined membership, or they each own it as community property with right of survivorship), then when one dies, the survivor automatically owns the interest in full. No probate is needed for that transfer because legally the survivor already had an undivided interest and now simply continues as sole owner. Caution: Many LLCs don’t structure ownership this way, and some operating agreements might not even allow it, since typically each member is an individual or entity with a distinct share. In community property states, spouses sometimes choose to title an LLC interest in both spouse’s names as community property with a survivorship feature (allowed in states like Texas and Arizona). This essentially functions like joint tenancy. It’s something to consider if you co-own an LLC with a spouse and want to ensure it passes seamlessly to the other.

6. Life Insurance or Retirement Accounts Owned by the LLC: This isn’t exactly a transfer strategy for the LLC interest, but it’s an estate planning angle. If the LLC holds significant assets, you might think of the LLC itself continuing and providing for heirs. For example, an LLC could be owned by a trust (which provides for the heirs), or the LLC could have its own life insurance policy (some businesses do this on key members, though typically the payout goes to the company, not directly to heirs). In any case, for assets like life insurance or IRAs that are inside the LLC or associated with it, ensure those have beneficiaries named to avoid any proceeds going into the estate.

7. Comprehensive Estate Plan Coordination: Overarching all these specific tools is the idea of a comprehensive estate plan. An experienced estate planning attorney will often use a combination of the above. For example, they might put the LLC interest in a trust and have a buy-sell agreement among the co-owners, plus making sure the operating agreement is aligned with the plan. They might also prepare a “pour-over will” as a safety net (this type of will directs any probate assets into a trust). So if something was mistakenly left out (say you forget to transfer a newly acquired LLC interest to your trust), the pour-over will can still catch it—but that asset would still go through probate in order to get poured over, which is why it’s a backup, not primary plan.

To present these strategies more clearly, here’s a table summarizing LLC Probate Avoidance Techniques:

As shown above, the gold standard is usually a living trust combined with a robust operating agreement. Transfer-on-death can be great where allowed. Buy-sell agreements are fantastic for multi-member LLCs to ensure business continuity and fairness to the deceased member’s family. Joint ownership is rarer but effective for married co-owners.

Opinion: It’s astounding how often business owners neglect these tools. They might meticulously build their company but fail to arrange for its transition at their death, inadvertently inviting probate judges into their business. A bit of planning can keep your enterprise out of a legal quagmire and moving forward under the guidance of those you trust.

State-Specific Nuances: How Top States Handle LLC Interests at Death

While the broad strokes are similar, each state has its own quirks in probate law and LLC statutes. Let’s examine nuances in several major states and jurisdictions, which often set trends or are commonly encountered:

Delaware – Business-Friendly but Watch the Operating Agreement

Delaware is famous for its business-friendly laws and is a popular state of formation for LLCs (even for owners who live elsewhere). Under Delaware law, an LLC interest is personal property that on death goes to the deceased member’s estate. Delaware LLC Act Section 18-705 provides that the member’s personal representative (executor or administrator) may exercise all the member’s rights for the purpose of settling the estate, including any rights an assignee would have to become a member. This means the executor can step in to handle the interest (for instance, to collect distributions or even to facilitate the sale or transfer of that interest), but the statute does not automatically make the heir a member. By default, if the deceased was one of multiple members, the heir or estate is an assignee: entitled to the economic value, but not voting power unless admitted as a member by the other members (or as allowed by the operating agreement).

• No Automatic Dissolution: Delaware’s default rule is that the LLC is not dissolved by a member’s death. The LLC continues with the remaining members. If it was a single-member LLC, the Delaware law allows the personal representative to exercise the member’s rights (which could include the right to admit an assignee as a new member, effectively allowing the estate or heir to become the member). If no new member is admitted, there’s a question: can a Delaware single-member LLC continue indefinitely with just an “estate” holding the interest? Generally, the expectation is the personal representative will either transfer the interest to an heir or wind up the company.

• Operating Agreement Supremacy: Delaware strongly defers to the freedom of contract in LLC agreements. The members can agree to virtually any arrangement on a member’s death. For instance, an OA could specify that the interest immediately transfers to a spouse or that the LLC must buy out the interest over a 5-year payout to the estate. Delaware courts will honor such provisions as long as they don’t conflict with any mandatory rules. If you form your LLC in Delaware, it’s wise to craft a detailed death/succession clause because Delaware gives you that flexibility. If you don’t, the default is that your executor can only settle your estate’s financial claims, and your heir won’t have control without others’ consent.

• Example Nuance: Delaware also has the Uniform TOD Security Registration Act in its statutes, but it’s not clear-cut that it covers LLC interests by default (Delaware could treat certain LLC membership units as securities if they are certificated, but typically a private LLC interest is not “registered” like a public security). Most Delaware LLC planners instead rely on trusts or contract provisions rather than TOD. Delaware law, being entity-centric, emphasizes internal solutions (like buy-sell agreements) to handle transitions.

California – Community Property and Revised LLC Act Provisions

California, a state with a high number of LLCs, has some unique points to consider:

• Community Property Effects: California is a community property state, which matters if the deceased owner was married. Community property means that assets acquired during marriage (outside of gifts/inheritance) are jointly owned 50/50 by spouses. If a married person in California forms an LLC or acquires an LLC interest while married (and doesn’t opt out via a pre/postnuptial agreement), the spouse likely owns half the interest automatically. If that spouse dies, their half of the community property interest is what goes through probate or per their will; the surviving spouse already owns the other half. This can simplify things if the surviving spouse was already a co-member (they might now essentially own the whole interest), but it can complicate if the spouse was not listed as a member—suddenly the estate and the spouse might both have a say. California allows spouses to hold title as “community property with right of survivorship” for some assets (like real estate), but with an LLC interest, typically the better route is to either make both spouses members or use a trust. Nonetheless, community property law means an estate may only be administering the decedent’s 50% share, not the full interest, which can be an unexpected nuance for co-owners from non-community states dealing with a California estate.

• CRULLCA (Updated LLC Law): California adopted the Revised Uniform Limited Liability Company Act effective January 2014 (often called RULLCA in CA, or just the California LLC Act, Cal. Corp. Code §17701.01 et seq.). Under this law, a member’s death results in dissociation of that member. The member’s rights to distributions transfer to the heirs or estate, but they are not automatically managing members. California’s default rules now say an LLC is not dissolved by an event of dissociation (like death) except in the case of a sole member (we’ll get to that). In a multi-member LLC, the deceased member’s interest effectively becomes an economic interest held by the estate/heirs, and the LLC can continue with remaining members. The heirs can become members only if the operating agreement or all members approve (Cal. Corp. Code §17704.01(c)(4) deals with rights of transferees and admission of members).

• Sole Member LLC – 90 Day Rule: A standout feature: if the LLC was a single-member LLC, California law provides a mechanism to avoid automatic dissolution. Cal. Corp. Code §17707.01(c) gives the heirs or successors 90 days after the member’s death to elect to continue the LLC and admit a new member (which could be one of the heirs or anyone they choose). If within 90 days someone eligible is appointed (by will or intestacy, the rightful new owner) and they agree to continue the LLC, the company doesn’t dissolve and that person becomes the substituted member. If they fail to do so, then the LLC would dissolve for having no members. Practically, this means the estate/personal representative should move quickly to coordinate with the heir(s) to keep the business alive. California also allows an operating agreement to directly name a successor to the sole member, which would satisfy that requirement immediately.

• Probate Processes: California’s probate system is known to be time-consuming and expensive for larger estates (statutory fee structure based on a percentage of assets). The state does have a small estate threshold (currently around $184,500 as of 2022, but it adjusts) under which heirs can use a simplified affidavit procedure instead of full probate. If the LLC interest’s value plus other probate assets are under that limit, the family could potentially skip formal probate by using a small estate affidavit after a waiting period. However, if the LLC owns real property, a separate threshold for real estate might necessitate at least a spousal property petition or probate. Essentially, in California, placing an LLC in a trust is heavily advised specifically to dodge the onerous probate system. Attorneys often remark that “any California business owner should have a living trust” given how probate can drag on for months or years.

• Example: Suppose Maria, a California resident, solely owns “Maria’s Marketing LLC.” She dies, leaving a will giving the LLC to her two children. The LLC doesn’t automatically dissolve, thanks to the law, but because it was a single-member LLC, her children need to step in. Within 90 days, they file paperwork (likely through the probate process or via an operating agreement clause) to continue the LLC and list themselves as new members. Meanwhile, because Maria only had a will, the transfer of her interest to the kids must go through probate court. If Maria had instead made her trust the owner of the LLC, the trust’s successor trustee could instantly allocate the LLC to the kids per the trust terms, and there’d be no 90-day scramble or court oversight.

New York – A Traditional Approach Evolving

New York was somewhat late to update its LLC law, but it did make changes from the original partnership-like stance:

• Original vs. Amended Default: New York’s original LLC Act (mid-1990s) said that a member’s death would cause an LLC dissolution unless the remaining members consented to continue the business. This was very much like a general partnership rule. However, New York amended that (in the late 1990s after the IRS made LLCs easier to use) to flip it: now, by default, an LLC will continue after a member’s death, and it will only dissolve if a majority (or whatever threshold stated in the operating agreement) of remaining members affirmatively choose to dissolve. This aligns with the modern trend to prevent unwarranted dissolutions. The change is codified in NY Limited Liability Company Law §701(b).

• Estate’s Role (NY LLC Law §608): Under NY law, when a member dies, their executor or administrator may exercise the member’s rights for purposes of settling the estate – similar language to Delaware. New York explicitly notes this includes any power of an assignee to become a member that might be granted by the operating agreement. In practice, the executor can receive information, demand an accounting, and even pursue legal actions (like a derivative lawsuit) as the estate’s representative of that LLC interest, just as a deceased shareholder’s executor could in a corporation. But unless the operating agreement allows a direct transfer of membership, the heir is again just a transferee without voting rights unless admitted by others.

• Consent for New Members: By default in NY (LLC Law §602 and §603), any transfer of a membership interest only gives the transferee the economic rights, and that transferee (including one who inherits by will or intestacy) is not entitled to become a member or exercise governance rights unless all remaining members consent or the operating agreement says otherwise. That means if you leave your LLC interest to your daughter, and you had a business partner, your daughter doesn’t automatically step into your partner meetings. She would only get distributions that would have gone to you, and only if your partner approves her as a new member would she get a seat at the table. Many small LLCs in NY, especially family ones, circumvent this by planning ahead – either making the child a member earlier or putting that interest in trust.

• Probate in NY: New York probate can be moderately complex (especially if assets are in NYC with high attorney fees). If there’s a dispute (and family business interests often spark disputes), the process can become a “business divorce” battle in Surrogate’s Court (New York’s probate court). It’s not uncommon for courts to appoint a temporary receiver to manage a business if the parties can’t agree during the estate administration. The best way to avoid that is to have clear documentation in the operating agreement about management post-death and to ideally use a trust to keep the interest out of the Surrogate’s Court jurisdiction as much as possible.

• Example: Let’s say in New York, two friends run an LLC, 50/50. One dies without an operating agreement clause on death and without a trust. The deceased friend’s 50% goes to his estate (he had a will leaving everything to his wife). The wife now only has a financial claim to 50% of profits. She wants to become a member to have a say, but the surviving friend doesn’t want her involved in decision-making. By default, he doesn’t have to accept her as a member. This could lead to a stalemate: she, as an assignee, can’t vote to dissolve or force a sale easily, but she could sue for her share of profits or to inspect books. In the end, they might negotiate a buyout. Had there been a buy-sell agreement or had the interest been in a trust that spelled out something, a lot of contention could be avoided.

Texas – Community Property and Strong Default Protections

Texas, another state with many small businesses and LLCs, brings in the dynamic of community property (like California) and has its own Business Organizations Code:

• Community Property: As in California, a married Texas LLC owner likely owns the interest jointly with their spouse (if acquired during marriage). On death, half belongs to the surviving spouse outright, and the other half is distributed via will or intestacy. Texas estate planners often ensure that if only one spouse is active in the LLC, the membership certificate might still list both spouses as co-owners (or they transfer it to a community property trust or something) to make transitions smoother. Texas also allows something called a “right of survivorship agreement” between spouses for community property, which could be applied to an LLC interest. If a properly executed agreement is in place stating that the spouses’ community property LLC interest will go wholly to the survivor at death, that would bypass probate for that transfer (it’s similar to joint tenancy but for community property). This requires specific language and often a filing of record.

• Texas LLC Law: Under the Texas Business Organizations Code (BOC), which governs LLCs, a member’s death results in the member’s interest becoming that of the estate (Tx. BOC § 101.111, for example, addresses the status of a deceased member’s assignee). The Texas default is that the assignee (heir/estate) has rights to allocations and distributions, but not management unless admitted as a member by the other members. One notable aspect: Texas law explicitly states that the membership interest is subject to transfer by the personal representative and that the buyer or heir can become a member with consent of remaining members or as provided by the company agreement. So it’s very much in line with the general principle we’ve discussed.

• No Automatic Dissolution: Texas does not dissolve an LLC upon a member’s death by default. The business continues. If it was single-member, Texas law (like many states) provides that the legal representative of the last member can take actions to continue the company and admit a new member (which could be themselves as executor or an heir). There’s usually a window (60 days or so) to admit a new member to avoid dissolution, as per some interpretations of the BOC; however, Texas may not have a hard 90-day rule like California, but practically an LLC can’t exist without any member, so the estate should assign the interest to someone (even if it’s the executor temporarily) promptly.

• Probate in Texas: Texas has a relatively streamlined probate system compared to some states, including an independent administration process (meaning the executor can do a lot without court hearings, if the will allows it or heirs agree). That said, if an LLC interest is part of the estate, the executor will likely list it in the inventory and handle it. If there’s a buyout by other members, the executor will execute that and it’s done. If the interest is being transferred to an heir, the executor might execute an assignment to the heir when ready. Texas also has small estate affidavit and summary procedures for modest estates, but many LLC interests (especially if they own real estate or a functioning business) will exceed those limits.

• Heir as LLC Manager Law: One interesting nuance—Texas recognizes that for certain licensed professions (like law or medicine), only licensed individuals can own the entity. If an owner dies, their estate can’t continue to own that interest beyond a short period or without a licensee stepping in. So if your LLC is a professional entity (PLLC), additional planning is needed to ensure it doesn’t run afoul of those rules at death.

• Example: Take a Texas LLC that’s husband and wife owned, or just husband owned but community property. Husband dies, leaving his interest via will to wife. Under community property, wife likely already had half; the other half will go through probate (but Texas independent administration means she can wrap it up quickly). The LLC operating agreement had a clause that any deceased member’s interest may be bought by the surviving members, but here the only surviving member is the wife. She effectively ends up with 100% ownership, either automatically for half and via will for the other half. Because Texas allows a spouse to receive community property without much fuss (especially if there’s a survivorship agreement, which is like a shortcut), it might even bypass probate if set up. If not, the probate distribution to the spouse is straightforward since there’s no conflict (assuming no other heirs contest).

Florida – Dissociation on Death and Timelines

Florida updated its LLC act in 2014 (similar to the Revised Uniform Act) and has some noteworthy points:

• Immediate Dissociation: Florida law states that when a member dies, they are immediately dissociated from the LLC (Florida Statutes §605.0602). This means they cease to be a member at that moment. The LLC continues, but now that person’s rights are held by their estate as a transferee. The Florida statute mirrors the concept that the deceased member’s management rights terminate, but economic rights persist for the benefit of the estate.

• Multi-Member vs Single-Member: In a multi-member LLC, Florida’s default is continuation. The remaining members keep running it. The deceased member’s interest is now an interest “held by transferee” (the estate). That transferee (the estate or whoever inherits later) is not entitled to participate in management or access information beyond what is necessary to receive distributions, absent consent of others. Essentially, the same story: they get the financial value, but not a say in running the company by default.

• Single-Member LLC rule: If a sole member of a Florida LLC dies, Florida law (similar to CA) gives the estate or heirs 90 days to act. Specifically, someone with rightful interest (heir or personal rep) needs to agree to continue the LLC and become a member. If after 90 days no one steps up as the new member, the LLC may be dissolved for having no members. In practice, the personal representative usually will assign the interest to the heir or a trust, thereby creating a new member, well within that time. Florida’s approach ensures that a profitable business or asset-holding LLC isn’t instantly dead upon an owner’s death, but it does require timely action by the survivors.

• Probate Administration Nuance: Florida probate law gives a personal representative fairly broad powers, but one quirky rule is a 4-month deadline to wind up a decedent’s unincorporated business (as mentioned in a Florida probate guide). If the business is an LLC, it’s not unincorporated (in the sense of sole prop), so that rule doesn’t directly limit an LLC. In fact, if you had a business and you die, and it was just Bob’s Widgets as a sole proprietorship, the PR only has 4 months to operate it without special court permission. If it’s Bob’s Widgets, LLC, the LLC can continue to operate (maybe with an interim manager) and the court isn’t automatically micromanaging it. This is another nod to the benefit of having an LLC: your business operations aren’t forced to a quick close by law, whereas a sole prop might be.

• Homestead and LLCs: Florida has strong homestead protections (homestead property avoids probate in some ways and goes to heirs by constitutional provisions, also creditors can’t touch it). But if a homestead (primary residence) is placed into an LLC, it loses that homestead status and becomes just another asset. This is an ancillary point, but in estate planning one must be careful in Florida: putting your personal residence in an LLC could expose it to probate (as an LLC interest) whereas keeping it in your name could avoid probate via homestead petition to the court (or via a life estate deed). So sometimes, avoiding probate with an LLC works for rental or investment properties, but maybe not for homestead due to Florida’s unique laws.

• Example: If John in Florida has a single-member LLC and dies, his daughter, who he named in his will, needs to work with the probate court to get appointed as personal representative (if not already) and then express the election to keep the LLC running (likely by updating the LLC’s articles or records to show she’s now the member). If done swiftly, the LLC never stops operating. The actual transfer of the membership to her will be recognized once the estate proceedings establish her as the heir. If John had instead named his daughter as a TOD beneficiary in the operating agreement or made his living trust the member, it would have been even smoother, with little to no court delay.

Ohio – Notable Transfer-on-Death Provision

We highlight Ohio not because it’s a top state by population, but because it illustrates a novel approach that other states may emulate:

• Ohio treats an LLC membership interest as a type of security that can be registered in TOD form. Thanks to Ohio’s adoption of the Uniform TOD Security Registration Act, an LLC membership interest if represented by a certificate or recorded in company books can include a “transfer on death” designation. For instance, Ohio Rev. Code §1709.01-1709.11 includes LLC interests in the definition of securities that can have a beneficiary form registration. This means the LLC’s records could say “Jane Doe TOD to John Doe Jr.” on her membership. When Jane dies, John Jr. automatically becomes the owner of that interest, by operation of law, not by probate. It’s essentially like naming a beneficiary on a stock account.
• The catch is you must explicitly set this up in the LLC operating agreement or member certificate. It’s not automatic. If done, it’s a very clean transfer. Few states have explicitly done this, but a few others, like Arizona, have statutes allowing TOD registration for closely held securities which might include LLC interests as well.
• This is a little-known tool, but powerful in states that allow it. Business owners who know about it can avoid the complexity of trusts if they have, say, a simple plan to leave the business to one person. They can essentially do a beneficiary form like they would on a bank account.
• Outside of TOD, Ohio’s general rules align with RULLCA – death dissociates the member, interest to estate, etc. We focus on TOD because it’s a distinguishing factor.

Other States and General Trends

Other major states typically follow one of the patterns above:

• Illinois and New Jersey: Similar to NY in that an heir is a mere assignee absent consent. Illinois has strong charging order protections but that’s more for creditors. No unique probate shortcuts for LLCs beyond standard planning.
• Pennsylvania: Follows Uniform LLC Act, no surprises – interest goes to estate, must admit heirs as members by consent.
• Georgia/North Carolina: Also follow modern default of no dissolution on death.
• Community Property States like Arizona, Nevada, Washington etc.: They have nuances with spouse’s share and often allow right of survivorship titling of community property.
• Uniform Probate Code States (about 18 states, including e.g. Arizona, Michigan, Colorado): They provide streamlined probate processes and often allow things like summary administration for small estates, but nothing that changes the fundamental treatment of LLC interests – they’re estate assets unless made non-probate by planning.

Big Picture: Across the U.S., no state forces an LLC interest to avoid probate without some proactive measure by the owner. The laws are getting better at allowing LLCs to survive an owner’s death (so the business isn’t forced to liquidate), but the transfer of the ownership interest still needs either a legal proceeding or a plan in place. As a specialist, my slightly opinionated advice is: treat your LLC interest just like you would your house or bank account in estate planning. Don’t assume your company’s existence means your ownership automatically goes where you want without hassle. Use the tools available (trusts, agreements, etc.) to make it straightforward.

Now, to address some common questions that readers often have on this topic, here’s a concise FAQ:

FAQ

Q: Does an LLC have to go through probate when the owner dies?
A: Yes, if the LLC ownership interest is in the deceased’s name alone with no trust or beneficiary, it will go through probate to transfer that interest to heirs.

Q: Does an LLC itself ever go through probate?
A: No, the LLC entity doesn’t go through probate. Only the deceased person’s ownership rights in the LLC are subject to probate; the LLC’s assets remain titled to the LLC.

Q: Can a living trust prevent my LLC interest from going through probate?
A: Yes, placing your LLC interest into a revocable living trust avoids probate. The trust (which doesn’t die) continues to own the interest, so a court doesn’t need to transfer ownership.

Q: Do multi-member LLCs avoid probate when one member dies?
A: No, the deceased member’s share still goes to their estate or heirs (probate for that share if no plan). The LLC continues operating, but the ownership transfer of that share may be handled in probate.

Q: Will my single-member LLC dissolve if I die?
A: No, not automatically. Most states allow time for a new owner to be appointed. If someone (heir or executor) steps in promptly per state law or an operating agreement, the LLC can continue without dissolving.

Q: Can I name a beneficiary for my LLC like I do for a bank account?
A: Yes, in some states. A few states allow a transfer-on-death (TOD) designation for LLC interests. If available, naming a beneficiary means the interest passes directly to them, avoiding probate.

Q: If I have a will leaving my LLC to someone, is probate still needed?
A: Yes, a will still requires probate. The will directs who inherits the LLC interest, but the court process is needed to validate the will and empower the executor to transfer the interest.

Q: Should I add my spouse or child as a co-owner to avoid probate?
A: Yes, adding a co-owner with rights of survivorship would avoid probate for that interest (it would pass to the survivor). However, this has implications for control and is not suitable for all situations—many prefer using a trust instead.

Q: Are LLC interests treated differently in community property states on death?
A: Yes, in community property states, a spouse automatically owns half if the interest was acquired during marriage. The deceased’s half goes through probate (if no trust), but the surviving spouse’s half is retained outright, avoiding probate for that portion.

Q: If my LLC has a buy-sell agreement, do we avoid probate?
A: Yes, in the sense that the ownership transfer is contractually handled. The estate will receive payment for the interest per the agreement, reducing court involvement in the transfer. The estate’s receipt of cash may still be part of probate, but the business transition happens outside of it.

Q: Can an executor run the LLC during probate?
A: Yes, an executor or personal representative can usually manage or sell the LLC interest and sometimes even participate in operations to preserve value. They often need to act within certain time frames or with court approval if the operating agreement doesn’t grant that authority upfront.