Detailed Answer
When someone inherits what was a decedent’s membership interest in a single‑member limited liability company (LLC) in Louisiana, the interest first passes through the decedent’s succession. After the succession process (probate) is complete, the personal representative (executor or administrator) can transfer the membership interest to the heir or legatee, but how that happens and what rights transfer depend on two things: the LLC’s governing documents (articles of organization and operating agreement) and Louisiana law governing successions and business organizations.
Primary legal sources you can consult:
- Louisiana Revised Statutes, Title 12 (Business Organizations) — rules that govern LLCs: https://legis.la.gov/Legis/LawSearch.aspx?title=12
- Louisiana succession law (procedures for administering estates) — see the statutes on successions: https://legis.la.gov/Legis/LawSearch.aspx?title=9
- Louisiana Secretary of State — business filing and amendment procedures: https://www.sos.la.gov/BusinessEntities/Pages/default.aspx
Key principles to understand:
- The membership interest is an asset of the succession. The personal representative collects and transfers estate assets in accordance with the succession judgment and any will.
- Operating agreements commonly distinguish between (a) a transferrable economic or distributional interest (the right to receive profits/losses and distributions) and (b) the governance/management rights of a member (voting and management). Under many LLC regimes, a transfer of economic interest does not automatically make the transferee a member with management rights unless the operating agreement or the law allows admission.
- Most LLCs include transfer restrictions (e.g., right of first refusal, required consent of other members). In a single‑member LLC, those restrictions and the operating agreement determine whether an heir can step into the decedent’s shoes as a full member (with management rights) or only receives economic rights.
Step‑by‑step practical process
- Complete the succession process. The succession must be opened and administered in the proper parish court. The court will issue the documents (succession judgment or letters testamentary/administration) that authorize the personal representative to transfer estate assets.
- Gather LLC documents. Obtain the LLC’s articles of organization, any operating agreement, recent membership ledger or records, and any buy‑sell or restriction clauses. The operating agreement is the controlling document for many transfer rules.
- Determine what transfers by operation of law. If the operating agreement allows free transfer, the personal representative can assign the membership interest to the heir by written assignment and update the LLC’s records. If the agreement limits transfers, those procedures (consent, buyout, right of first refusal) must be followed before admission as a member.
- Prepare transfer paperwork. Typical documents include: a written Assignment of Membership Interest signed by the personal representative; a certified copy of the succession judgment or letters; and any required member consent form. Attach the succession papers so the LLC can verify authority to transfer.
- Update company records and, if needed, the Secretary of State. Record the transfer in the LLC’s membership ledger and minutes. If you want the member list or organizer info changed on public filings, file the appropriate Certificate of Amendment or update forms with the Louisiana Secretary of State at the Business Entities portal above.
- Clarify management rights. If the heir will exercise management/voting powers, confirm that the LLC admits the transferee as a member under the operating agreement or state law. If admission requires approval that is withheld, the heir may only hold economic rights until an agreement is reached (or buyout occurs).
- Address taxes and creditor claims. The estate and the transferee should check federal tax consequences and any Louisiana filing obligations. Also ensure that creditors’ claims against the succession are handled before final distribution of the asset to the heir.
Common obstacles and how to handle them
- If the operating agreement contains a right of first refusal or mandatory buyout, follow that contract: notify the LLC and any members, give them required election periods, and complete any buyout procedure.
- If the LLC refuses to admit the heir as a member, the heir may still hold distributional rights (receive profits) but not governance rights. Consider negotiation, settlement, or asking the court to interpret ambiguous agreement language.
- If the succession is unfinished or contested, do not attempt to transfer the membership until the court issues the necessary succession documents authorizing the personal representative.
- If the decedent’s operating agreement is missing or ambiguous, the LLC’s default statutory rules apply. Consult the statutes in Title 12 for default governance and transfer rules: Title 12, Louisiana Revised Statutes.
When to get professional help
- Disputed successions or conflicting wills.
- Operating agreements with unclear or restrictive transfer clauses.
- Complex company structures, multiple creditors, or tax concerns (estate and income tax issues).
- If other members or managers contest the transfer or refuse to follow the written rules.
Practical checklist for an executor or heir
- Obtain certified succession judgment or letters signed by the court.
- Get certified copies of the LLC’s articles and operating agreement.
- Prepare an assignment of membership interest and attach succession documents.
- Provide required notices to the LLC and other members per the operating agreement.
- Record the change in the LLC’s internal records and file any desired amendments with the Secretary of State.
- Consult a tax advisor about estate and income tax consequences.
Helpful links
- Louisiana Revised Statutes, Title 12 (Business Organizations): https://legis.la.gov/Legis/LawSearch.aspx?title=12
- Louisiana statutes on successions (search Title 9): https://legis.la.gov/Legis/LawSearch.aspx?title=9
- Louisiana Secretary of State, Business Entities — filings and forms: https://www.sos.la.gov/BusinessEntities/Pages/default.aspx
Helpful Hints
- Start with the operating agreement. It often answers transfer questions directly.
- Do not sign anything or attempt to exercise management powers until the succession court authorizes the transfer and the LLC admits the transferee as a member if required.
- Keep thorough records: succession judgment, assignment, member consents, and any SOS filings.
- If the LLC has bank accounts, change signatories only after the LLC authorizes the transfer and the bank receives proper documents.
- Check whether the LLC’s articles of organization list members publicly; if so, consider filing an amendment after the transfer to keep public records accurate.
Disclaimer: This article explains general principles of Louisiana law and common practice. It is educational only and does not constitute legal advice. For advice specific to your situation, consult a licensed Louisiana attorney experienced in successions and business law.