• Recent Posts

  • Martindale Hubbell AV Rating

    The Greater Williamsburg area is an exciting place to live and work, especially because of the large number of entrepreneurs who have built businesses from the ground up. These entrepreneurs have taken their passion and made it their profession. Many of us want to take that step. Before you begin, you need to think of the type of business entity you want to form. Our attorneys have extensive business experience, from small one-person companies to publicly traded major corporations. Our attorneys are among the leaders in Virginia in the representation of Common Interest Communities. These communities are generally referred to as "homeowners associations," or "HOAs," and "condominium associations." In the greater Williamsburg area alone, we provide legal assistance to nearly 100 associations. Our attorneys have successfully prosecuted and defended a wide array of civil disputes involving community association covenant enforcement, commercial transactions, construction disputes, contracts, real estate matters, boundary line and easement disputes, employment matters, antitrust litigation, copyright violations, administrative proceedings, and estate issues. Real Estate law encompasses a wide variety of matters, and our attorneys have vast experience to assist you. Whether you need assistance with a commercial or residential closing, or you have questions relating to residential or commercial leasing, we provide experienced advice and counsel to our clients. Zoning law can be a complicated maze of statutes and ordinances. We have ample experience in successful applications for rezoning, variance, and special use permit requests. Finally, commercial and residential construction provide special challenges with respect to financing issues and the construction process. We serve as counsel to various financial institutions.
Print This Post

Limited Liability Companies: What happens to an LLC when a Member dies?

This case has been overturned by statute. Check out this blog post for the details.

We have written about the importance of operating agreements to help succession planning for your limited liability company (“LLC”). Operating agreements can help the company with procedures to remove a member, or with procedures to permit a member to leave the LLC on his own accord. This blog post reviews a recent Virginia Supreme Court case that shows the importance, and limitations of your LLC operating agreement to set forth succession planning of a member’s interest when that member dies.

Williamsburg Virginia Business Lawyers

LLC Agreements

In the case of Ott v. Monroe, there were 2 members of an LLC, a husband and wife. The husband (“Dewey”) owned an 80% membership interest, and his wife (“Lou Ann”) owned the remaining 20% and was the managing member. When Dewey passed away, his Will showed that he bequeathed his entire estate to his daughter, Janet. Janet proclaimed that because her father’s estate included the LLC membership interest, she became the majority member of the LLC. Janet  immediately removed Lou Ann as the managing member and took control of the LLC herself. Consequently, the issue in the case was “What rights did Janet have in the company by succeeding to her father’s membership interests?”

The Virginia Supreme Court noted that a membership interest in an LLC is composed of two components: a control interest, which permits the member to participate in the administration of the LLC’s affairs, and a financial interest, which allows the member to share in the company’s profits and losses, and to receive distributions from the business’ income and assets. The Court looked to the Virginia statutes that permit an LLC member to unilaterally assign his financial interest in the company, but to obtain the control interest, the member must obtain the “consent of a majority of those members exercising the direct management of the company.”

Janet received her father’s membership interests by a unilateral assignment through her father’s Will, and because the only remaining member, Lou Ann, did not consent to Janet’s membership in the LLC, the Virginia Supreme Court ruled that Dewey’s Will could not make her a member of the company upon his death. Therefore, Janet “inherited only Dewey’s financial interest in the Company – the right to share in profits and losses and to receive distributions.” Furthermore, even if the company’s operating agreement provided for a procedure to transfer membership interests upon the death of a member, the Virginia Supreme Court stated that “it is not possible for a member unilaterally to alienate his personal control interest in a limited liability company.”

Does your limited liability company’s operating agreement set forth procedures for dealing with the membership interests of a member upon death? As shown in this case, the remaining members of your company could be in a state of flux jeopardizing the LLC’s survival. You may not have reviewed your operating agreement since your company was formed. When in doubt, contact your experienced business lawyer to review your operating agreement for peace of mind.

jt photo 150x150 Its time for your Small Business to audit its Corporate Documents

Tarley Robinson, PLC,  Williamsburg, VA – Attorneys and Counsellors at Law


John Tarley

John Tarley

John is the firm's managing partner and chairs the firm's small business, zoning, and litigation practice areas.

More Posts - Website

Follow Me:

Filed under: Business Planning, John Tarley, Merger & Acquisition, Weekly Tweets by John Tarley

Comments are closed.

« | »
  • Phone Numbers

    (757) 229-4281- Office

    (757) 229-7439 - Fax
  • Address

    4801 Courthouse Street Suite 122 Williamsburg, Virginia 23188
Web Development by OneWaveMedia.Com