Disclaimer

This article explains general Montana law and common practice. It does not provide legal advice. Consult a licensed Montana attorney and a tax professional about your specific situation before taking action.

Detailed answer — what to know and do under Montana law

Under Montana law, an LLC member’s ownership interest generally breaks into two parts: (1) the economic/financial rights (right to distributions and share of proceeds) and (2) the membership rights (voting, management, participation). Many state LLC statutes treat a member’s transferable interest as personal property that can pass to heirs, while admission as a full member may require consent. You must follow the LLC’s operating agreement and Montana law to complete the transfer properly.

Key legal resources (Montana Code):

• Montana LLC and business organization statutes: Montana Code Annotated, Title 35 (Business Organizations).
• Montana probate/estate administration statutes (for authority to act on behalf of the estate): Montana Code Annotated, Title 72 (Probate & Trusts).

Typical legal rules you should expect

• Property passing through probate: Membership interests are estate property. The personal representative (executor or administrator) can transfer the decedent’s transferable interest under court authority once appointed and issued Letters Testamentary/Letters of Administration (see Montana probate rules).
• Assignment vs. admission: An heir or devisee can receive an assignment of the decedent’s economic rights (distributions), but becoming a full member with voting/management rights usually requires admission under the operating agreement or by member approval.
• Single-member LLC changes: If the decedent was the sole member, an inheritance can either (a) result in the heir being admitted as the new sole member (if permitted), or (b) leave the heir as an assignee of economic rights only until members or the operating agreement formally admit them. If another person is admitted, the LLC may become a multi-member LLC for tax purposes.
• Operating agreement controls: The company’s operating agreement often tells you (i) what happens when a member dies, (ii) how transfers work, and (iii) whether the company will continue and who may be admitted.

Step-by-step actions to transfer the inherited interest

1. Obtain authority from probate court. If there is a will, the executor must get Letters Testamentary; if intestate, the court appoints an administrator. The personal representative’s authority is required to transfer estate property. See Montana probate rules at Title 72.
2. Review the LLC’s governing documents. Pull the Articles of Organization and the operating agreement. Look for sections titled “transfer on death,” “death of a member,” “admission of new members,” and “assignability.” The operating agreement may prescribe a buyout, right of first refusal, or automatic admission rules for heirs.
3. Determine what you actually inherit. Probate transfers the decedent’s property. You may inherit (a) the full membership interest including voting rights (if the LLC or operating agreement so provides and members admit you), or (b) only the economic/financial rights until the LLC admits you as a member.
4. Communicate with the LLC manager or remaining members. Provide the death certificate, Letters of Administration/Testamentary, and a copy of the will. Request a meeting to confirm next steps and any required consents or buyouts.
5. Use a written assignment or transfer document. The personal representative usually signs an Assignment of Membership Interest (or Transfer of Membership Interest) that clearly states what rights transfer and whether admission as a member is requested. Keep a copy of the operating agreement, the assignment, death certificate, and Letters for the LLC’s records.
6. Update LLC internal records and file any necessary state forms. Have the LLC update its membership ledger and, if required by the operating agreement or for clarity, amend the Articles of Organization or file an ownership update with the Montana Secretary of State. (Montana requires periodic business filings; check the Secretary of State for form requirements.)
7. Address tax and banking issues. If the LLC moves from single-member to multi-member, its federal tax classification likely changes from a disregarded entity to a partnership—requiring an EIN update, partnership tax returns (Form 1065), and K-1s for members. Consult a CPA for tax filings and any estate tax or income tax implications.
8. Record and retain documentation. Keep all probate court orders, Letters, assignment documents, operating agreement amendments, and member approvals in the LLC’s records and the estate file.

Special considerations for Montana single-member LLCs

• If the operating agreement contains a buy-sell clause, the LLC or the surviving members may have the right to purchase the decedent’s interest. Follow timelines and valuation methods exactly.
• If the decedent was the only manager and no one is admitted as manager or member, the LLC’s ability to act may be limited until a new manager or member is formally admitted.
• Montana does not require that an assignee become a member automatically; check the operating agreement and state statutes in Title 35 for admission rules: Title 35.

Helpful hints — quick checklist and common pitfalls

• Checklist of documents to gather: death certificate, will (if any), Letters Testamentary/Administration, the LLC’s Articles and operating agreement, recent member ledger, tax returns for the LLC, and any buy-sell valuations or appraisals.
• Don’t assume admission: Just inheriting the economic interest does not always give you voting or management control. Get written confirmation of your membership status.
• Watch tax status changes: If you become a member in a formerly single-member LLC, the entity likely becomes a partnership for tax purposes. File IRS form SS-4 for a new EIN if the tax status changes.
• Follow buyout procedures strictly: Missing notice periods or valuation steps in the operating agreement can void the other party’s buyout rights.
• File paperwork with the Secretary of State if required: Montana’s business filing requirements change; check the Montana Secretary of State website for forms and filing rules after a membership change.
• Get professional help early: Probate lawyers, business attorneys experienced with Montana LLCs, and CPAs can prevent costly mistakes.
• If the LLC is inactive or has debts, address creditor claims and outstanding obligations before accepting distributions.

When to contact an attorney or tax adviser

Hire a Montana probate attorney if you need authority to act for the estate, if the will is contested, or if the LLC operating agreement is silent or ambiguous about transfers on death. Contact a business attorney if the LLC’s operating agreement requires complex member approvals, buyouts, or amendments. Consult a tax advisor to handle possible entity classification changes, estate tax liabilities, and income tax reporting.