LLC rights to surviviorship

[KristenT]

I currently have an LLC with 3 members. We are wanting to add a 4th member but do not want the spouse to have rights to survivor ship if the member passes away. Can we exclude survivor ship rights on an LLC? Are there any survivor ship rights automatically? We live in Florida.

The current members are myself, my husband and father-in-law. We want to add my grandfather, however, he just got married about 1 year ago. And I do not want his new wife to have a claim to my business if he passes.

Thank you

 

[LdiJ]

I currently have an LLC with 3 members. We are wanting to add a 4th member but do not want the spouse to have rights to survivor ship if the member passes away. Can we exclude survivor ship rights on an LLC? Are there any survivor ship rights automatically? We live in Florida.

The current members are myself, my husband and father-in-law. We want to add my grandfather, however, he just got married about 1 year ago. And I do not want his new wife to have a claim to my business if he passes.

Thank you

That can be problematic if you want to treat your grandfather differently than the other members. If no one's spouse inherits if the member passes away, then its not a problem at all. However, I suspect that you would want to inherit your husband's portion if he passes away, he would want to inherit yours, and he would want to inherit his father's portion or would want his mother to inherit his father's portion. Therefore, I see that being problematic for you.

 

[FlyingRon]

You'd need to make arrangements specifically in the LLC operating agreement. Further, certain things just aren't waivable. The Florida LLC act has specific provisions for the involuntary dissociation (expulsion) of members. You'd best speak to an attorney to draft the appropriate protections you are after.

 

[latigo]

I currently have an LLC with 3 members. We are wanting to add a 4th member but do not want the spouse to have rights to survivor ship if the member passes away. Can we exclude survivor ship rights on an LLC? Are there any survivor ship rights automatically? We live in Florida.

The current members are myself, my husband and father-in-law. We want to add my grandfather, however, he just got married about 1 year ago. And I do not want his new wife to have a claim to my business if he passes.

Thank you

Please disregard Ldij's unschooled "legal/business advice".

There is nothing tricky or difficult in accomplishing your desire to maintain continuity of ownership of the LLC. Talk to your lawyer about a buy and sell agreement. With the understanding that it not a DIY project. You will need professional help.

Also it would be wise that your attorney have a look at the entire operation, including the accounting methods and distribution of profit. Why the importance?

Because presumably the business entity was created in order to protect individual assets and wisely so. What you need to avoid is any supportable perceptions that it is functioning as a separate legal entity in name only. In other words, as the alter ego of a family business. Your lawyer will explain.

 

[LdiJ]

Please disregard Ldij's unschooled "legal/business advice".

There is nothing tricky or difficult in accomplishing your desire to maintain continuity of ownership of the LLC. Talk to your lawyer about a buy and sell agreement. With the understanding that it not a DIY project. You will need professional help.

Also it would be wise that your attorney have a look at the entire operation, including the accounting methods and distribution of profit. Why the importance?

Because presumably the business entity was created in order to protect individual assets and wisely so. What you need to avoid is any supportable perceptions that it is functioning as a separate legal entity in name only. In other words, as the alter ego of a family business. Your lawyer will explain.

Latigo knows very little about business, but his advice to consult an attorney is wise, because as I previously stated, its problematic to treat one member differently than the others. There are ways around that but it certainly is tricky with your particular set of facts.

The idea of a "buy and sell" agreement is certainly one potential solution, but that only works if funds are available to "buy". With small, family owned businesses the funds are often not available, when needed. If the business is successful and another generation is brought into the business to work, then a buy and sell agreement can cause problems years down the road.