A Jacksonville contractor formed a single-member LLC the year he launched the business. He filed the Articles of Organization, got his EIN, opened a bank account, and skipped the operating agreement. Twelve years later he died unexpectedly. His widow assumed she would step in and run the company. She could not. The bank froze the account. The general contractor's license could not be transferred. Two active jobs ground to a halt. The probate court eventually appointed a personal representative, but by then the crews had moved on and the company was effectively gone.
The Florida Revised LLC Act has default rules for what happens when a member dies without an operating agreement. Those rules are not wrong. They are just generic. They were never drafted with a specific business in mind, and they produce results most founders would never sign up for if they understood them in advance.
The Default Rule: Economic Rights Pass, Management Rights Do Not
Florida Statutes section 605.0602 splits a membership interest into two pieces. The transferable interest is the economic side: the right to receive distributions and a share of assets on dissolution. That part passes to the estate at death and then to whoever inherits under the will or, without a will, under Florida's intestacy statute.
The management rights do not pass automatically. The heir or transferee becomes an "assignee" or "transferee" of the economic interest only. To become a voting member with management authority, the heir must be admitted by the remaining members, and absent an operating agreement that says otherwise, that admission requires unanimous consent under section 605.0401.
In a multi-member LLC, this means surviving members can keep the heir out of the management of the company while still owing the estate distributions. In a single-member LLC, there are no surviving members to consent. The interest sits in the estate until probate appoints a personal representative, and the company's operations stall in the meantime.
Single-Member LLC: The Management Vacuum
A single-member Florida LLC with no operating agreement is the cleanest illustration of why the default rules are insufficient. On the day the sole member dies, no one has clear authority to sign contracts, write checks, hire employees, or interact with the company's bank. The bank will typically freeze the account until a personal representative is appointed and presents Letters of Administration. That process commonly takes thirty to ninety days. For a business that runs on weekly payroll or active projects, that gap is fatal.
An operating agreement can name a successor manager who takes over on the original member's death or incapacity. The successor can be named by name or by role, can be given limited interim authority (sign payroll, maintain contracts, preserve assets) and can be required to act under the direction of the personal representative once one is appointed. None of that is the default. All of it is available in a properly drafted agreement.
Multi-Member LLC: The Forced Buyout Problem
In a multi-member LLC, the default rule creates a different problem. The surviving members may not want the deceased member's spouse or children running the business. The estate may not want an indefinite passive interest in a company it cannot vote. Neither side has a clean way out without a written agreement.
The statute does not impose a mandatory buyout. The estate cannot force the LLC to redeem the interest, and the LLC cannot force the estate to sell. Both sides are stuck unless they negotiate, and negotiations after a death, with grieving heirs and surviving members under operational pressure, tend to go badly.
An operating agreement can include a mandatory buyout on death, with a valuation formula (book value, agreed-upon multiple of revenue, third-party appraisal) and a funding mechanism (typically life insurance owned by the company or cross-purchased between members). The buyout closes the loop: the estate gets liquidity, the surviving members keep clean control, and the price is set in advance rather than fought over after the fact.
Intestacy Adds Another Layer
If the deceased member had no will, Florida's intestacy statute decides who inherits the economic interest. The result is often fractional ownership across a spouse and adult children, or across siblings if there is no surviving spouse or descendants. Each fractional owner is an assignee of the economic interest. In a multi-member LLC, that means the remaining members may be negotiating with a group of inheritors rather than a single estate. Coordination becomes the limiting factor.
An operating agreement cannot rewrite the intestacy statute, but it can avoid the worst of the outcome by requiring the buyout, by limiting transferability to specific permitted transferees, or by requiring that any heir admitted as a member sign an adoption agreement that incorporates the LLC's existing terms. The related background on Florida LLC fundamentals appears in what every Florida LLC owner should know.
What a Properly Drafted Operating Agreement Adds
A succession-aware operating agreement does four specific jobs the statute will not do for you.
- Names a successor manager. Identifies who runs the company on death or incapacity, with what authority, and under what reporting obligations to the estate.
- Sets a buyout mechanism. Defines the price (or the formula), the timing, and the funding source. Life insurance funding is the most common and is taxed favorably when structured correctly.
- Controls who can become a member. Restricts transferability so that economic interests cannot fragment uncontrolled and management cannot end up with unintended parties.
- Provides continuity for licenses and contracts. Customer contracts, vendor agreements, and professional or contractor licenses often have change-of-control or key-person clauses. An operating agreement aligned with those clauses preserves the value of the underlying contracts on a transition.
The Cost of Waiting
The Florida LLC owners who run into the worst outcomes are not the ones who made a bad choice. They are the ones who made no choice and let the default statute decide. A succession-aware operating agreement drafted while everyone is healthy and rational is inexpensive. Negotiating one across surviving members, grieving heirs, and a personal representative under operational pressure is expensive and often unsuccessful.
If your LLC was formed online without an operating agreement, or with a generic template that says nothing about death, incapacity, or transfer restrictions, that gap is worth closing now. It is the kind of document that does nothing until the day it does everything.