The limited liability company is a popular vehicle these days among business owners and those seeking to shield assets due to the comparative ease of setting one up compared to a corporation and the liability protection they offer. However, many of those that file for an LLC never take the time to create and file an operating agreement concerning the entity which could lead to problems in the event of death or incapacitation. Depending on the laws of the jurisdiction, the lack of an operating agreement could significantly hamper the ability of an estate representative to appoint new management when needed or sell an interest in the LLC since many states set have defaults that restrict the ability to transfer an ownership interest with approval by other members. While not every state will be the same, it is still a very good idea to create an operating agreement that specifically addresses the ability for personal representatives to act on the owners behalf, transfer shares, and handle distribution of profits. A failure to do so could leave an estate at the mercy of one size fits all laws that have little mercy on those that do not prepare otherwise.
See Carla Ranum, Should Your LLC Have an Operating Agreement?, Core Compass, December 29, 2015.
