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Detailed Answer

1. Who holds the membership interest while probate is pending?

When the only member of a single-member LLC dies, the decedent’s membership interest becomes part of the decedent’s probate estate. The personal representative (executor or administrator) controls estate property, including the decedent’s business interests, until probate distributes the interest to the beneficiary under the will or under Michigan intestacy rules (MCL 700.1101 and surrounding sections). The estate can exercise the decedent’s economic rights (e.g., receive distributions) through the personal representative, subject to the LLC’s operating agreement and Michigan law.

2. Distinguish economic interest from membership (management) rights

LLC ownership usually has two parts: (1) the economic interest (right to share in profits and distributions) and (2) the governance or membership rights (voting, management, or control). Many operating agreements and Michigan LLC law treat them differently:

• The economic interest is typically transferable by the owner or the owner’s estate. That means the heir or beneficiary generally acquires the right to receive distributions allocated to the decedent’s interest.
• Admission as a member with management rights often requires the consent of the LLC or its remaining members under the operating agreement. A transferee may receive only economic rights until formally admitted as a member.

These distinctions mean that even after probate distributes the decedent’s interest, the beneficiary may not automatically step into the decedent’s active role in company management unless the operating agreement or members agree.

3. Check the governing documents and Michigan LLC law

First, obtain and read the LLC’s operating agreement, articles of organization, and any buy-sell agreements. These documents commonly address: transfer restrictions, required consents, buyout rights on death, notice requirements, and whether the transferee can be admitted as a member. Michigan’s LLC statute governs where the operating agreement is silent; consult the Michigan Limited Liability Company Act for defaults (MCL 450.4101 and related provisions).

4. Typical steps to transfer an inherited interest after probate

1. Obtain the probate documentation: certified death certificate and the probate court order distributing the interest to you or a copy of the will and letters testamentary / letters of administration.
2. Determine what was transferred by the probate order: confirm whether the order conveys the entire membership interest or just economic rights. The language in the order and in the LLC documents matters.
3. Review the operating agreement for restrictions: some agreements require surviving members to buy out the decedent’s interest, or require consent before a transferee becomes a member.
4. If the operating agreement or members require admission, request an admission vote or written consent from the LLC’s manager(s) or members. Provide the probate documents and any requested affidavit of heirship or assignment.
5. If the LLC admits you as a member, execute an acceptance or amendment to the operating agreement (or enter a joinder agreement), and update internal records (member ledger, membership certificates if any).
6. If the LLC does not admit you as a member, obtain a written assignment documenting your economic rights (distributions, allocations) and keep records showing the estate’s transfer to you.
7. File any necessary state filings: if the LLC’s articles name members or managers and those public filings must be updated, file an amendment with Michigan’s Corporations Division through LARA (Michigan Department of Licensing and Regulatory Affairs) if required (Michigan LARA — Business Services).
8. Notify banks, lenders, and third parties that do business with the LLC and present the probate order and any admission documents as requested.

5. Common complications and how they arise

• If the operating agreement includes a buy-sell or right-of-first-refusal, members may force a buyout rather than allow an heir to take a management role.
• Creditors may have claims against the estate; distributions may be paused until claims are resolved.
• If the decedent was the sole manager, the LLC may be left without a manager. The operating agreement or statute will control how a manager vacancy is filled. If no procedure exists, you may need court or member action to appoint a manager.
• If you are not admitted as a member but hold only economic rights, you will receive profits but cannot bind the company or vote.

6. Tax and valuation considerations

Inheritance of an LLC interest often triggers valuation and tax issues. The estate may receive a step-up in tax basis at death — this affects capital gains when the interest is later sold. Also consider estate tax filing thresholds, income tax reporting for LLC distributions during and after probate, and potential partnership tax classification issues if the LLC has multiple members after transfer. Consult a tax professional familiar with Michigan and federal tax rules.

7. When to get lawyers involved

Work with a probate attorney if the estate is not yet closed. Use a business or transactional lawyer for operating agreement interpretation, drafting assignments or admission documents, and updating LLC records. If members dispute the transfer, a litigation attorney may be necessary.

8. Helpful Michigan statute references

Key codes to review early in the process:

• Michigan Limited Liability Company Act (Michigan Compiled Laws Chapter 450): MCL 450.4101 et seq.
• Michigan Estates and Protected Individuals Code (probate law): MCL 700.1101 et seq.
• State filing and entity maintenance through LARA (Business Services): Michigan LARA — Business Services

Because specific statute sections that control transfers and admission can appear in different subsections and recent updates occur, review the LLC act and consult counsel for exact statutory language that applies to your situation.

Helpful Hints

• Start with the operating agreement — it usually governs more than the statutes.
• Keep originals and certified copies of the death certificate, probate order, and your letters testamentary or letters of administration.
• If you want management rights, ask for a written admission and an executed amendment or joinder to the operating agreement.
• Expect members to enforce buy-sell or valuation provisions; get a professional business valuation if needed.
• Check whether the LLC is managed by a manager or by members — that controls how management vacancies are filled.
• File amendments only when required by the articles or by LARA instructions; internal membership changes are often recorded in the LLC’s records rather than in public filings.
• Talk to a tax advisor before selling or accepting distributions — tax consequences can be significant for heirs.
• If the LLC operates in multiple states, review other states’ laws and potential registration requirements.
• Document every communication and consent in writing. Verbal agreements rarely protect you.
• If the estate is complex or contested, involve a probate attorney early to avoid delays in transferring the interest.