Minnesota: What Happens to an LLC Member's Share When a Member Dies

Detailed Answer

If an LLC operating agreement in Minnesota is silent about what happens to a member’s ownership interest at the member’s death, state law fills the gap with default rules. Two legal points matter most: (1) whether a member’s economic interest passes to the decedent’s estate or beneficiaries, and (2) whether a transferee (the estate or a beneficiary) becomes a full member with management and voting rights, or only receives distribution (economic) rights.

Under Minnesota’s statutory LLC framework, an LLC membership interest is generally split into the transferable economic right and the management/participatory right. When a member dies, the member’s transferable economic interest typically passes to the decedent’s estate and ultimately to heirs or devisees through probate or other estate-transfer mechanisms. The estate or beneficiary therefore can receive distributions tied to the decedent’s share.

However, the statutory default usually treats the transferee as holding only the dead member’s financial (economic) interest—not the management rights—unless the remaining members consent to allow the transferee to step into the deceased member’s managerial role. That means the executor, heir, or beneficiary generally cannot vote, attend member-only meetings, or make binding management decisions for the LLC unless the LLC’s other members agree or the operating agreement or company records provide otherwise. Minnesota’s limited liability company statutes set out these default rules and the process for dissociation and transfer of interests; see the Minnesota statutes on limited liability companies for details: Minn. Stat. ch. 322C.

Most practical outcomes under Minnesota law when an operating agreement is silent:

• The deceased member’s economic interest becomes part of the probate estate and passes to the executor or beneficiaries under Minnesota probate rules; see Minn. Stat. ch. 524.
• The estate or beneficiary can receive distributions attributable to the deceased member’s share.
• The estate or beneficiary typically does not automatically acquire management, voting, or membership rights. The surviving members must usually approve the transferee to become a full member.
• The LLC may have the option—under its statutory defaults or under agreements among members—to buy out the decedent’s interest, admit the transferee as a member, or continue operating with the remaining members. The operating agreement, articles of organization, or a statutory provision will control the buyout process and valuation method if present; if not, Minnesota default rules apply.

Because an operating agreement is silent, the LLC’s internal procedures and the remaining members’ decisions become highly important. Common results you may see in practice:

• Buyout by the LLC or remaining members at a fair-value formula or judicially determined value.
• Admission of the heir or devisee as a non-managing holder who receives distributions but not governance rights.
• Forced dissolution only in narrow circumstances (for example, if the LLC is a single-member LLC and no one can take the deceased member’s place), but Minnesota default rules and the articles of organization determine the exact result.

Steps for an executor, beneficiary, or surviving member

1. Notify the LLC in writing and provide a certified copy of the death certificate and letters testamentary or letters of administration if you are the personal representative.
2. Review the operating agreement and the articles of organization (even if silent on death, they may include related clauses like buy-sell, member transfer restrictions, or valuation methods).
3. Determine whether probate will be necessary to transfer the decedent’s economic interest; consult Minnesota probate procedures: Minn. Stat. ch. 524.
4. Ask whether the remaining members will admit the transferee as a member or prefer a buyout. If parties disagree, consider mediation or legal advice to avoid litigation.
5. Consult a Minnesota attorney with experience in LLCs and probate to protect estate or member interests and to navigate valuation, buyout, or admission procedures.

Common Hypothetical Scenarios (Illustrative)

Hypothetical 1: A 30% member dies, no operating agreement provision. The member’s will devises assets to an heir. Under Minnesota default rules, the heir receives the decedent’s economic interest and can collect distributions, but the LLC’s other members must approve any admission of the heir as a voting member. If the members prefer not to admit the heir, they may negotiate a buyout.

Hypothetical 2: Single-member LLC owner dies and there is no plan in the operating agreement. If no one is authorized to continue the business under the articles or estate plan, the estate may need to resolve the interest via probate and either sell the business or seek court guidance for continuation or dissolution.

When Minnesota Statutes Apply

Minnesota’s limited liability company statutes supply default rules where the operating agreement is silent. For statutory language and default rules, review the Minnesota Revisor of Statutes chapter for limited liability companies: Minn. Stat. ch. 322C. For probate and estate transfer rules that determine who legally receives the decedent’s economic assets, see: Minn. Stat. ch. 524.

Helpful Hints

• Do not assume heirs automatically become managers. Confirm membership admission rules before acting.
• If you are a member, add clear death, disability, and buyout provisions to the operating agreement now to avoid uncertainty.
• Executors: gather the LLC’s formation documents and any meeting minutes before contacting members or claiming distributions.
• Consider a buy-sell agreement funded by life insurance to provide liquidity and avoid forced sales or family disputes.
• Keep a copy of the operating agreement with estate planning documents so beneficiaries and executors can find it quickly.
• If the LLC is a single-member entity, have a successor plan—Minnesota default rules may not allow seamless continuation without advance planning.
• Consult a Minnesota attorney experienced in both probate and business law for combined estate and LLC planning advice.