It depends first on the operating agreement, and second on your state's LLC law. Without an agreement that says otherwise, under the revised LLC acts many states follow (including Florida), a deceased member's estate or heir usually receives the economic rights (their share of distributions) but not the right to vote or manage unless the other members admit them. In a single-member LLC, Florida law says the company dissolves after 90 consecutive days with no members unless someone is admitted. A buy-sell clause funded with life insurance turns all of that into a clean cash buyout.
We are licensed insurance brokers, not CPAs or attorneys. Treat the tax and legal points on this page as general education, and confirm them with your own CPA or attorney before acting.
On this page
Step one: read the operating agreement
An LLC's operating agreement is a contract among the members, and in most states it overrides the default rules in the LLC statute. When a member dies, the agreement may say:
- The company or the remaining members must buy the deceased member's interest (a mandatory buy-sell), at a set price or formula.
- They may buy it (an option), and if they do not, the heir keeps the economic interest.
- The heir is automatically admitted as a member, or may be admitted with a vote.
- Nothing at all, which leaves the state's default rules in charge.
Many small LLCs were formed online with a template agreement, or none. If that describes yours, the default rules below are what your family and your partners would face.
Multi-member LLC defaults
Under the revised uniform LLC act that a number of states have adopted in some form (Florida's version is Chapter 605), a member who dies is dissociated from the company. Their estate or heir generally steps into the transferable interest: the right to receive the distributions the member would have received. They typically do not get voting or management rights unless the remaining members consent to admit them.
That creates an awkward result for everyone:
- The family owns an economic stake but has no say, and cannot force distributions or a sale.
- The surviving members have a silent partner who shares in profits but contributes no work.
- Nobody has the cash to buy anyone out, and a valuation fight is likely.
Single-member LLCs
When the only member dies, the LLC has no members. Florida Statute 605.0701 provides that an LLC dissolves after 90 consecutive days with no members, unless within that period the holders of a majority of the rights to distributions consent to admit at least one member and someone actually becomes a member. In practice that means the estate's personal representative or the heir needs to act quickly, and the business may stall while probate gets underway.
A single-member owner can plan around this by naming a successor in the operating agreement, holding the interest in a revocable trust so the trustee can act immediately, and, if a key employee should take over, a one-way buy-sell funded with life insurance owned by that employee. See what happens to my business if I die.
Funding the buyout with life insurance
A buy-sell provision in the operating agreement fixes who buys, at what price, and on what timeline. Life insurance gives the buyer the money. For LLCs taxed as partnerships:
| Structure | Who owns the policies | Notes |
|---|---|---|
| Cross-purchase | Each member owns a policy on each other member | Clean for 2 or 3 members; survivors buy the interest directly |
| Redemption (liquidation) | The LLC owns one policy per member | Simple, but after Connelly the proceeds count toward the LLC's value |
| Insurance LLC | A separate LLC owns one policy per member | Good for 4 or more members; see insurance LLC buy-sell |
Transfers of policies among LLC members taxed as partners fall within an exception to the transfer-for-value rule, which makes restructuring easier than in a corporation. Compare the options in cross-purchase vs entity redemption and size them with the buy-sell calculator.
A short checklist for LLC owners
- Find your operating agreement and read the transfer, death and dissociation sections.
- Decide who should own the business after a death, and put it in writing.
- Agree on a price method and update the value every year.
- Fund the buyout with life insurance, and cover disability too.
- Have a business attorney in your state review the whole thing.
Frequently asked questions
Do heirs automatically become LLC members?
Usually not. Unless the operating agreement says otherwise, heirs typically receive the economic interest (distributions) without voting or management rights until the other members admit them.
What happens to a single-member LLC when the owner dies in Florida?
Under Florida Statute 605.0701, the LLC dissolves after 90 consecutive days with no members unless, within that time, the holders of a majority of the rights to distributions consent to admit a member and that person becomes a member. Planning with a trust or a named successor avoids the scramble.
Can the remaining members force the heirs to sell?
Only if the operating agreement gives them that right. A buy-sell provision is what makes a sale mandatory at an agreed price.
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Written by Erik Moran
Erik co-owns Moran Insurance Group with Amanda Moran and handles the agency's life insurance cases, from key person and buy-sell coverage to trust-owned policies. He works alongside clients' CPAs and attorneys, who make the tax and legal calls. More about Erik.
Sources
Moran Insurance Group is a licensed insurance agency. Our brokers are not CPAs, attorneys or tax advisors, and nothing on this page is tax, legal or investment advice. Tax figures and rules reflect our understanding as of October 2026 and can change. Coverage is subject to carrier underwriting and state availability. Confirm anything tax or legal with a licensed CPA or attorney before you act on it.