Most people do not want to talk about what will happen when they die, but if you own a business, whether as a sole proprietor, member of a partnership, or have an interest in a limited liability company (LLC), you need to plan for this event to protect your business and your heirs. At Springer & Lyle, we help you through the planning process to be sure your wishes are expressed and carried out after you are gone.
If your business is a sole proprietorship, the business will terminate upon your death and your business assets will become part of your estate. They will pass to your heirs according to the terms of your will. If you do not have a will, they will pass according to Texas law regarding intestate succession.
If you are in a partnership, what happens to the business depends upon whether you have a partnership agreement in place and what the terms of that are concerning the death of a partner. You may also have a buy-sell agreement that articulates how the business interests are divided if one of the partners dies.
Your will is also a valuable document that you should prepare in a way that will comply with your business interests. Your will can ensure that your wishes regarding your business continue after your death.
Limited Liability Company (LLC)
What happens to your LLC depends on a lot of factors and is governed by your agreements and governing documents. For example, look to the Certificate of Formation. What it says about whether the LLC is expected to exist perpetually, or only intended to survive for a specific amount of time governs what happens upon your death.
Your Operating Agreement should also spell out what will happen when a member dies. If your agreement does not cover this issue, then state law controls how your interest is distributed among your heirs. Generally, if you are the only member of the LLC, and did not make a provision for what happens to it upon your death, Texas state law will determine what happens next.
To make certain what happens to your business, partnership, or LLC upon your death is according to your wishes, you need to consult with an experienced estate planning attorney. Contact Springer & Lyle’s estate planning attorney, Aubry Dameron, at 940-387-0404 for more information and to schedule a consultation.