If your spouse, family member, or someone you know, was operating a small business and passes away, what can happen to that business? If that business was organized as a limited liability company in the state of Texas, the business may be able to continue to operate.
In Texas, the death of the sole, or last remaining, member of a limited liability company (“LLC”) does not always mean that the LLC must dissolve. To determine if dissolution is required, the first place that one should turn to is the Certificate of Formation which will state if the entity is formed to exist perpetually or is intended to survive for a specific duration. If the LLC was designed to only survive for the duration of the single member’s life, then dissolution will likely be required. However, if the LLC was formed for perpetual existence, as is the case for most LLCs, then dissolution will likely not be required.
Under the laws governing LLCs in Texas, the company must have at least one member and that membership interest is considered personal property of that member. If that member is married, and applicable laws apply, that membership interest may be community property. Unless the LLC’s governing documents state otherwise one’s membership interest in an LLC is assignable, and such assignment does not require the LLC to begin winding up. Also, if unstated in the LLC’s governing documents, upon the death of a member, the member's surviving spouse, if any, and an heir, devisee, personal representative, or other successor of the member, to the extent of their respective membership interest, are assignees of the membership interest. However, LLCs are highly governed by their agreements and governing documents. If you are faced with this situation or one similar it is important that you speak with a qualified attorney.