What happens to a Limited Liability Company (LLC) when an owner dies?

When an owner of a Limited Liability Company (LLC) dies, the most accurate scenario is that the LLC can continue operating depending on the provisions outlined in the operating agreement and state laws. Many LLCs have specific rules regarding the transfer of ownership interest upon an owner's death. In most cases, the deceased owner's interest can be passed down to heirs or designated beneficiaries, ensuring continuity of the business.

While someone might assume that an LLC must be dissolved immediately upon the death of an owner, this is not universally true. The structure of an LLC provides flexibility in succession, which allows for the business to either continue with the remaining members or transfer ownership to new members, pending agreement among the remaining partners.

This highlights the importance of having a well-drafted operating agreement that outlines what happens in the event of an owner's death, including whether existing members can buy out the deceased member's share and how the company will be managed going forward.