As a business owner, you may want your family to maintain some stability if something happens to you. But if you own part of a Florida limited liability company (LLC), passing on your share does not always mean passing on your role in running the business. Florida law treats financial rights and management rights as separate.
Without a succession plan, your family and co-owners may have to rely on Florida’s default rules. Your death ends your membership in the LLC. An heir or beneficiary could receive the financial part of your interest without gaining the same voting or management rights you had.
What your successor receives
Florida calls someone who receives your transferable financial rights a transferee. That person generally has the right to receive distributions connected to your former interest. Receiving those rights alone does not make the person an LLC member or give that person a vote in company decisions.
Your personal representative handles your LLC interest while settling your estate. That person can exercise certain rights that Florida law gives your estate during this process. If you had the power to let a transferee become a member, your personal representative may use that authority while handling your estate.
How your operating agreement can guide succession
Your operating agreement can set rules for your LLC, including what happens to your role after you die. It might name a successor or explain what approval that person must receive to become a member. If the agreement does not address succession, Florida’s default rules apply.
A new person can become a member in the way your operating agreement allows. If the agreement does not explain how, all existing members generally must agree. A different issue arises if your death leaves the company with no members. Florida gives the LLC 90 consecutive days to admit a new member through the process set by law. If that does not happen, the LLC dissolves.
Plan for future ownership changes
A succession plan can address who receives the financial value of your LLC interest and who may take part in running the company. As part of the planning process, you may want to compare your operating agreement with your will or trust. Keeping those documents consistent can help your estate and the LLC follow the same succession plan.