When an LLC Operating Agreement Is Silent About a Member’s Death: How New Jersey Law Applies

Short answer: If your New Jersey LLC’s operating agreement says nothing about what happens to a member’s interest at death, the member’s personal representative (executor or administrator) and beneficiaries usually receive the economic (financial) rights to that member’s share, but they do not automatically receive management or voting rights. The deceased member’s membership or managerial role generally remains subject to the remaining members’ control unless the members agree otherwise or the operating agreement is amended.

Detailed answer — What happens under New Jersey law

New Jersey follows the Revised Uniform Limited Liability Company Act framework in the New Jersey Limited Liability Company Act (N.J.S.A. Title 42, Chapter 2C). When an operating agreement is silent about death, default statutory rules and common business practice govern the result. The practical consequences fall into three categories: (1) economic rights, (2) management and voting rights, and (3) admission as a member.

1) Economic rights (right to distributions)

If the operating agreement is silent, the decedent’s estate or transferees generally keep the right to receive distributions of profits and other economic benefits attributable to the deceased member’s LLC interest. The estate (through the personal representative) can usually collect money the LLC owes the decedent and receive future distributions that would have been paid to that member.

2) Management and voting rights

Default law typically treats a post-death transferee or the estate as an assignee of the deceased member’s economic interest, not as an automatic replacement member with management or voting authority. That means the estate or beneficiaries do not automatically acquire the right to vote, participate in management, or exercise dissociation remedies unless the remaining members consent or the LLC’s governing documents (or a court order) admit the transferee as a member. In practice, management control usually stays with the surviving members unless they agree otherwise.

3) Admission as a member and dissociation

When a member dies, the member is typically treated as dissociated (no longer an active member). The estate may have the option to seek admission as a substitute member if the other members consent. If the members refuse admission and the operating agreement is silent, the estate usually remains an economic interest holder only. If the estate wants full membership, members will need to follow the LLC’s admission procedures or amend the operating agreement and obtain consent.

4) Interaction with probate and estate law

The decedent’s LLC interest (the economic component) passes under the decedent’s will or by intestate succession if there is no will. The personal representative must follow probate procedures to collect distributions or to transfer the economic interest. For basic probate information in New Jersey, see the New Jersey Courts self-help pages: https://www.njcourts.gov/selfhelp/willsestate.html.

5) Statutory references and where to look

Key provisions for LLC governance and member/transferee rights are in the New Jersey Limited Liability Company Act (N.J.S.A. 42:2C-1 et seq.). For the statute text and to review the Act, see the New Jersey Legislature’s statute pages: https://www.njleg.state.nj.us/Statutes (search Title 42, Chapter 2C). Those statutes set default rules that apply when the operating agreement does not address a specific issue.

Short hypothetical example

Example: Maria and Joe form an LLC in New Jersey and split profits 50/50. Their operating agreement is silent about death. If Maria dies and leaves her membership interest to her daughter in her will, Maria’s daughter will inherit Maria’s economic right to Maria’s share of future distributions. But Maria’s daughter would not automatically be able to vote on management decisions or act as a manager unless Joe agrees to admit her as a member or the operating agreement is amended to allow her admission.

Practical steps for members and estates

1. Locate the operating agreement and articles of organization. Check for any clauses on transfer, death, buyout, or admission of transferees.
2. Confirm whether the LLC has a buy-sell or valuation clause. If so, follow that process (often the surviving members buy the deceased member’s economic interest at a set valuation).
3. Notify the LLC and provide a death certificate to the company records custodian.
4. Personal representative: open probate or present the will to the court and obtain letters testamentary or letters of administration as required for handling the decedent’s property.
5. If you are a surviving member: consider quickly agreeing on a procedure for valuation and purchase to avoid disputes and to keep the business running smoothly.
6. Document any agreement to admit a transferee as a member in writing and amend the operating agreement and membership ledger.
7. Get legal and tax advice. Transfers of LLC interests can have estate-tax, income-tax, and basis implications that should be evaluated.

Common issues and risks to watch for

• Disputes over valuation: If the operating agreement is silent, members or the estate may argue over how to value the deceased member’s share.
• Management vacuum or conflict: If the deceased member was active in management, silence can create operational gaps or disputes about control.
• Creditors and claims: Creditors of the deceased may make claims against the member’s economic interests during probate.
• Delay from probate: If the estate’s right to distributions is tied up in probate, the LLC and its members may face cashflow or operational problems.

What you can do now

If your operating agreement is silent about death, you and the other members should consider taking proactive steps:

• Amend the operating agreement to add clear buy-sell and transfer rules (including valuation and payment terms).
• Create cross-purchase agreements or corporate buy-sell arrangements funded by life insurance to finance buyouts.
• Work with an attorney and tax advisor to draft provisions tailored to your business goals and New Jersey law.

Helpful Hints

• Keep a signed, up-to-date operating agreement and a current membership ledger in the company records. That speeds up post-death administration.
• Include a buy-sell clause and a valuation formula in the operating agreement to avoid disputes and provide liquidity to the decedent’s estate.
• Consider using life insurance inside a buy-sell plan to fund purchases of a decedent’s interest.
• If you inherit an LLC interest and want management rights, get the consent of other members in writing and amend the operating agreement.
• When in doubt, get a short consultation with an attorney experienced in New Jersey LLC and estate law to review your operating agreement and options.

Disclaimer: This article explains general rules under New Jersey law and is for educational purposes only. It does not constitute legal advice, and it does not create an attorney-client relationship. For advice about a particular situation, consult a licensed New Jersey attorney.