If a business owner in Texas dies without a will or other estate planning tool, like a trust, a buy-sell agreement, or updated governing documents for the business, Texas law will decide how the estate is handled. The decisions made might not be what the business owner wants, what’s best for his or her beneficiaries, or even what’s best for the business. Talk to a Plano, TX business attorney right away to get your succession plan in place and be confident in the future of your business.
When a Business Owner Dies Without a Succession Plan in Plano, TX
When there’s no succession plan, the default rules from the Texas Business Organizations Code apply to the situation, and, in most cases, business operations will struggle to continue as normal. The business (or at least the deceased owner’s interest in it) must now go through probate, which can take months or even years to resolve.
Probate is overseen by the court, and a court-appointed administrator manage things if there’s no will (if there’s a will, the name executor becomes the manager). The administrator or executor may have plenty of experience related to administering estates, but that does not guarantee they know anything about business.
Outcomes by Business Type
Sole Proprietorship
With a sole proprietorship, the business is not a separate legal entity and is tied directly to the owner. Upon death, it effectively terminates or ceases to exist in its prior form. All business assets pass into the larger estate and are distributed to heirs.
Single-Member LLC
Texas law treats the LLC as a separate entity, so it does not automatically dissolve upon the member’s death unless specified otherwise. The membership interest passes to the estate and then to heirs. The heirs or the estate administrator may petition the court to continue running the business, or the administrator may manage it temporarily, but if there aren’t clear provisions in the company operating agreement, things are very likely to stall.
Multi-Member LLC
In a multi-member LLC, the company generally continues operating unless the business agreement specifies dissolution upon the death of a member. In this case, the deceased member’s interest would transfer to their estate and then to the heirs, who become assignees. In most cases, they’re not entitled to full management or voting rights unless all members approve or the operating agreement allows it, but even without those rights, if the heirs are inexperienced, uninterested, or in conflict with surviving members, there’s a lot of room for dispute.
Corporation
With a corporation, the deceased’s shares will transfer to the estate and heirs through probate or intestacy. The corporation itself continues as a separate entity, and the heirs become shareholders but may or may not gain operational control, depending on the details. Again, there’s a high risk of conflict.
Partnership
In a partnership, the death of a partner will often mean the dissolution of the business, unless the partnership agreement provides otherwise.
Secure Your Future With the Help of an Experienced Business Attorney
Without proactive planning, the future of your business and your heirs is at risk. Talk to us today at DeCandido & Azachi in Plano, TX and Forest Hills, NY to get started protecting what you love.
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