What Georgia Law Says When Your Operating Agreement Is Silent
Georgia LLC law is permissive — the operating agreement can override most default rules. But when the agreement is silent, the defaults apply. Under O.C.G.A. § 14-11-401, a member’s interest is personal property and can be transferred. But transferring the economic interest is not the same as transferring membership. Under O.C.G.A. § 14-11-503, the transferee of a membership interest becomes an assignee only. An assignee receives distributions but has no right to vote, participate in management, or access company records.
This is the default outcome when a Georgia LLC owner dies and the operating agreement says nothing about succession: the estate holds an assignee interest. The estate cannot manage the business. The estate cannot vote. The surviving co-owners are not legally obligated to accept the estate as a full member. Until the operating agreement or a court order says otherwise, the business has a ghost co-owner with economic rights and no seat at the table.
For single-member LLCs, the outcome is worse. There are no surviving co-owners to keep the business running. The LLC interest passes to the estate and sits frozen in probate for 9 to 18 months while the court appoints a personal representative. During that time, no one has clear authority to sign contracts, access bank accounts, or make payroll decisions.
The Succession Provisions Every Georgia LLC Operating Agreement Needs
An operating agreement that protects the business addresses four scenarios: death of an owner, incapacity of an owner, a voluntary exit, and a dispute between owners. The provisions below address death and incapacity specifically — the two scenarios that cannot be planned around after the fact.
Successor member designation. The agreement should name who becomes a full member (not just an assignee) when an owner dies. This is usually the owner’s revocable trust or a named individual. Without this provision, the estate holds an assignee interest by default.
Automatic admission of successor. Many operating agreements require a unanimous member vote to admit a new member. If the only member dies, there is no one left to vote. The agreement should include a provision that automatically admits the designated successor as a full member on death, without requiring a vote.
Incapacity provisions. The agreement should define what constitutes incapacity (typically a physician’s written statement), who has management authority during incapacity, and whether the incapacitated member’s vote is suspended. Without this language, a dispute over who can act for the company during the owner’s illness requires a court order.
Buy-sell trigger on death. If the LLC has multiple owners, the operating agreement or a separate buy-sell agreement should define whether the surviving owners have the right or obligation to purchase the deceased owner’s interest, the price or valuation method, and the payment terms. A buy-sell provision that uses a fixed price set years ago will be challenged under IRC § 2703 if the price no longer reflects fair market value.
Assignee-to-member conversion path. Even with a designated successor, some agreements require an additional member vote to convert assignee status to full membership. The agreement should eliminate this barrier for designated estate-planning successors.
Single-Member vs. Multi-Member LLC — Different Gaps, Same Urgency
The risks are different depending on how many owners the LLC has.
Single-member LLCs face a dissolution risk. Georgia law does not automatically dissolve a single-member LLC when the sole member dies, but it does not automatically transfer management authority either. If the operating agreement does not name a successor member and give them immediate management authority, the LLC is effectively leaderless until probate resolves — which takes 9 to 18 months. Contracts lapse. Employees leave. Clients find other vendors. The business may be worth significantly less by the time the estate has legal authority to act.
Multi-member LLCs face a different problem: an unwanted co-owner. The deceased member’s estate inherits the economic interest. The surviving members cannot force the estate to sell. The estate cannot be compelled to sell the interest back. The surviving members may disagree with the estate about distributions, strategy, or timing. Without a funded buy-sell agreement, the surviving owners are locked into a business relationship with an estate they did not choose and cannot exit.
Common Operating Agreement Gaps Georgia Business Owners Miss
The agreement names the owner, not the trust. Many business owners create a revocable trust for estate planning but never update the operating agreement to reflect trust ownership. The operating agreement still names the individual. When the individual dies, the LLC interest goes through probate even though the trust exists — because the operating agreement and the asset title were never aligned.
No definition of incapacity. An operating agreement that says “if a member becomes incapacitated” without defining what that means creates a dispute every time the provision needs to be invoked. The definition should reference a written physician’s certification and specify whether two physicians are required.
Buy-sell at a fixed price. A fixed buyout price set at formation becomes stale within a few years. If the IRS determines that the price does not reflect fair market value, the buy-sell provision can be disregarded under IRC § 2703, which means the estate is valued at FMV — not the discounted contract price. A formula-based valuation method (revenue multiple, EBITDA multiple, or third-party appraisal) avoids this problem.
No funded buy-sell. A buy-sell provision in the operating agreement is a legal obligation. If it is not backed by life insurance or a funded reserve, the surviving owners must come up with the buyout price from operating cash. An unfunded buy-sell is a promise with no money behind it.
The agreement was never updated after ownership changed. If an owner left, was added, or the ownership percentage changed, the operating agreement may no longer reflect the actual ownership structure. An operating agreement that does not match the current ownership creates a dispute about who holds what interest at exactly the moment clarity matters most.
How Trust Ownership Interacts With Your LLC Operating Agreement
Most Georgia estate planning attorneys recommend holding LLC interests inside a revocable living trust. This keeps the interest out of probate at death — the successor trustee steps in immediately under the trust agreement, without waiting for a court. But trust ownership only avoids probate if both steps are completed: the trust must be created, and the LLC interest must be retitled into the trust.
Retitling means amending the operating agreement (or a separate assignment of interest document) to show the trust — not the individual — as the member. The operating agreement entry changes from “John Smith, 100% member” to “John Smith, Trustee of the John Smith Revocable Trust, 100% member.” Without this retitling, the trust owns nothing. The individual still holds the interest, and it still goes through probate.
After retitling, the operating agreement must also address how trust-owned interests are managed. Specifically: the successor trustee (the person who takes over when the original trustee dies or becomes incapacitated) should have the same management authority as a full member. If the agreement requires a member vote to act and the only member is a trust whose trustee is deceased, the same governance gap exists — just one step removed.
For a full overview of estate planning options available to Georgia business owners, see Best Estate Planning for Georgia Business Owners.
Steps to Update Your Georgia LLC Operating Agreement for Succession
1
Pull and review your current operating agreement
Get the signed version — not the one from the registered agent’s website. Confirm who is listed as a member, what the ownership percentages are, and whether any succession, buyout, or incapacity provisions exist. Most generic operating agreements have none.
2
Draft or amend the succession provisions
Work with your estate planning attorney to add: a designated successor member, automatic admission language, an incapacity definition with a management authority provision, and a buy-sell framework with a current valuation method. If the LLC has multiple members, all members must sign any amendment.
3
Retitle the LLC interest into your revocable trust
Execute a written assignment of membership interest transferring ownership from you individually to you as trustee of your revocable trust. Update the operating agreement to reflect the new member name. File or record the assignment if required under Georgia law.
4
Fund the buy-sell agreement
If the updated operating agreement includes a buy-sell provision, confirm how it is funded. Life insurance is the most common mechanism — a policy sized to the agreed buyout price, owned by the correct party (cross-purchase vs. entity-redemption). An unfunded buy-sell is not a plan.
5
Schedule a review every 3 years or after any ownership change
An operating agreement that was accurate at signing can be completely wrong after a new partner joins, an owner exits, or the business valuation changes significantly. Set a calendar reminder. The cost of an amendment is a fraction of the cost of a dispute.
