{"id":2562,"date":"2023-05-26T17:16:38","date_gmt":"2023-05-26T21:16:38","guid":{"rendered":"http:\/\/blog.tarleyrobinson.com\/?p=2562"},"modified":"2023-05-26T17:16:38","modified_gmt":"2023-05-26T21:16:38","slug":"update-for-limited-liability-companies-what-happens-to-membership-interest-when-a-member-dies","status":"publish","type":"post","link":"https:\/\/blog.tarleyrobinson.com\/?p=2562","title":{"rendered":"Update for Limited Liability Companies: What happens to Membership Interest when a Member Dies?"},"content":{"rendered":"

We blogged about the Virginia Supreme Court case of Ott v. Monroe<\/i><\/a>. In that case, the Court ruled that when a father, in his will, assigned his majority interest in a limited liability company to his daughter, he only assigned a profit interest, not a control interest. Consequently, his daughter did not have the authority to \u201crun\u201d the company, absent the consent of the remaining LLC members.<\/p>\n

In its 2013 session, the General Assembly modified the relevant LLC statutes in an attempt to overturn the Virginia Supreme Court\u2019s decision. This blog post examines the new statute, and how it may impact your limited liability company<\/a>.<\/p>\n

\"Business<\/a>
\n<\/p>\n

In the Ott v. Monroe<\/i> case, the Virginia Supreme Court noted that pursuant to Va. Code Ann. \u00a7 13.1-1040.1<\/a>, the death of a member acts to automatically dissociate that member from the LLC. Dissociation permits any assignee of the deceased member to only a \u201cprofit interest,\u201d not the \u201ccontrol interest.\u201d<\/p>\n

Furthermore, the Court held that even if the LLC\u2019s operating agreement stated an intention to \u201copt out\u201d of automatic dissociation, \u201cit is not possible for a member unilaterally to alienate his personal control interest in a limited liability company.\u201d The Court relied upon the language in Va. Code Ann. \u00a7 13.1-1039<\/a> that, according to the Court\u2019s interpretation, did not permit \u201cthe assignee to participate in the management and affairs of the limited liability company or to become or to exercise any rights of a member.\u201d<\/p>\n

The General Assembly modified the language of Va. Code Ann. \u00a7 13.1-1039<\/a> to permit the LLC\u2019s articles of organization or operating agreement to remove any limitations upon the rights of the assignee. However, the LLC’s governing documents must clearly set forth the members\u2019 intentions, or the members can find themselves in the same position as the parties in Ott v. Monroe<\/i>.<\/p>\n

In conclusion, for an assignee of an LLC membership interest upon the death of a member, and for that assignee to automatically have all the rights of a member, the operating agreement or articles of organization<\/p>\n

1.\u00a0\u00a0 Must contain language stating an intent to opt out of the automatic dissociation provisions of Va. Code Ann. \u00a7 13.1-1040.1<\/a>; and<\/p>\n

2.\u00a0\u00a0 Must contain language conferring automatic membership upon an assignee without having to obtain approval of the remaining members.<\/p>\n

Does your limited liability company\u2019s operating agreement set forth procedures for dealing with the membership interests of a member upon death? You may not have reviewed your operating agreement since your company was formed. When in doubt, contact\u00a0your experienced business lawyer<\/a>\u00a0to review your governing documents to make sure they accurately reflect your intentions.<\/p>\n

Tarley Robinson, PLC, \u00a0Williamsburg, VA \u2013 Attorneys and Counsellors at Law<\/strong><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

We blogged about the Virginia Supreme Court case of Ott v. Monroe. In that case, the Court ruled that when a father, in his will, assigned his majority interest in a limited liability company to his daughter, he only assigned a profit interest, not a control interest. Consequently, his daughter did not have the authority to \u201crun\u201d the company, absent the consent of the remaining LLC members.<\/p>\n

In its 2013 session, the General Assembly modified the relevant LLC statutes in an attempt to overturn the Virginia Supreme Court\u2019s decision. This blog post examines the new statute, and how it may impact your limited liability company.<\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[336,6,23],"tags":[167,14,151,189,168,72,42],"_links":{"self":[{"href":"https:\/\/blog.tarleyrobinson.com\/index.php?rest_route=\/wp\/v2\/posts\/2562"}],"collection":[{"href":"https:\/\/blog.tarleyrobinson.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.tarleyrobinson.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.tarleyrobinson.com\/index.php?rest_route=\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.tarleyrobinson.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=2562"}],"version-history":[{"count":14,"href":"https:\/\/blog.tarleyrobinson.com\/index.php?rest_route=\/wp\/v2\/posts\/2562\/revisions"}],"predecessor-version":[{"id":3019,"href":"https:\/\/blog.tarleyrobinson.com\/index.php?rest_route=\/wp\/v2\/posts\/2562\/revisions\/3019"}],"wp:attachment":[{"href":"https:\/\/blog.tarleyrobinson.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2562"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.tarleyrobinson.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2562"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.tarleyrobinson.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2562"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}