What Happens to the Assets of a Florida LLC When the Sole Member Dies?

Many self-employed individuals in Florida create a limited liability company (LLC) to manage their business. An LLC combines the features of a corporation and a sole proprietorship. That is to say, the LLC protects the individual member’s personal assets from business creditors. But the IRS “disregards” the LLC’s existence for income tax purposes, so any income or losses from the business are simply reported on the member’s personal 1040 each year.

LLC Does Not Automatically Dissolve Upon Member’s Death

So what happens to any assets held by an LLC after the sole member (owner) dies? The Florida Third District Court of Appeal recently addressed this question. In Ezeamama v. In Re: Estate of Ezeamama Chibugo, the sole member of an LLC passed away. At the time of the sole member’s death, the LLC owned real property.

The property itself was mortgages. So the mortgage holder filed a creditor claim against the sole member’s probate estate seeking payment of the outstanding balance. The personal representative of the estate then asked the probate court to determine whether or not the real property was actually an estate asset. The creditor took no position on the issue. The probate court then determined that the LLC dissolved upon the sole member’s death, so the real property was therefore now an asset of the estate.

The Third District disagreed. It noted the Florida Supreme Court has said that “the affairs of a corporation, even though substantially owned by a decedent, cannot be administered by decedent’s executor as assets of the decedent’s estate.” This same reasoning applied to single-member LLCs. Any assets owned by the LLC are therefore not estate assets.

More to the point, the LLC does not automatically dissolve upon the death of a sole member. Under Florida law, the death of a member does cause that member’s “disassociation” from the LLC. But the LLC is not actually dissolved as a matter of law until 90 days after that disassociation. And even after 90 days have passed, the LLC continues to exist until articles of dissolution are filed with the state. In any event, the real property owned by the LLC did not immediately pass to the sole member’s estate upon her death.

Contact Attorney Mark R. Manceri Today

In cases where a deceased person owned stock in a corporation–even 100 percent of the stock–their death has no immediate effect on the corporation’s continued existence. Ownership of the stock would simply pass under the terms of the decedent’s will, or to their heirs according to Florida intestacy law. It would then be up to the new owners to decide whether to continue or close the business.

If you need legal advice in a trust or estate matter from a qualified Pompano Beach probate vs. nonprobate assets lawyer, call the offices of Mark R. Manceri, P.A., Attorney at Law today at 954-491-7099 to schedule an initial consultation with a member of our team.

Source:

3dca.flcourts.gov/content/download/2425772/opinion/Opinion_2023-0855.pdf