The distinction between member-managed and manager-managed changes everything when the manager dies. Understanding why requires understanding what management authority actually means under Georgia law.
Member-Managed vs. Manager-Managed — What the Distinction Actually Means
A member-managed LLC is the default in Georgia. Every member has actual authority to bind the LLC to contracts, make hiring decisions, open and close bank accounts, and execute legal agreements on the company’s behalf.
A manager-managed LLC is different by design. The members elect a manager (or managers) and delegate all management authority to them. In exchange, the members step back from day-to-day operations. They do not sign contracts. They do not make employment decisions. They share in profits and receive distributions, but the authority to run the company belongs exclusively to the manager.
This structure works well while the manager is alive and capable. It is common in LLCs with passive investors, family businesses where one person handles operations, and professional practices. The design advantage is centralized decision-making. The design risk is that all operational authority is concentrated in one person.
That concentration becomes a crisis the moment the manager dies without a succession plan in place. For a complete overview of what that plan should include, see Best Succession Planning Strategy for a Georgia LLC.
What Happens the Day the Manager Dies
When the manager of a Georgia LLC dies, their authority to act on behalf of the company ends immediately. There is no grace period. No automatic transfer of authority. No temporary acting manager created by state law.
What exists instead is a vacancy in the manager position and a company that cannot legally act until that vacancy is properly filled.
The manager’s membership interest (if they were also a member) passes to their estate or heirs. But under O.C.G.A. § 14-11-506, heirs inherit assignee rights only. They receive economic distributions but have no voting rights and no management authority. They cannot participate in a member vote to appoint a new manager. They cannot instruct existing managers on how to act. They receive money when it is distributed, and nothing else.
If the operating agreement requires a member vote to appoint a new manager, and the deceased manager was the sole or controlling member, the remaining members may be unable to form a quorum or reach the approval threshold the agreement requires.
The company is legally intact. Its contracts remain valid. Its bank accounts exist. Its employees are still employed. But no one has the authority to sign a new contract, direct the employees, or access the accounts. The LLC is operationally frozen.
Which Transactions Fail Without a Manager
The specific transactions that require manager authority depend on what the operating agreement says, but in a typical manager-managed LLC, the following cannot be completed without a manager in place:
- Contract execution: The manager’s signature is required for any agreement binding the LLC. Without a manager, the LLC cannot sign vendor agreements, client contracts, leases, or service agreements. A pending contract close stops.
- Banking transactions: Business bank accounts are controlled by authorized signatories listed on the bank’s signature cards. If the deceased manager is the sole authorized signatory, the bank may freeze the account or refuse transactions until a replacement is authorized — a process that requires manager authority to initiate.
- Employment decisions: Hiring, terminating, and compensating employees typically requires manager sign-off. Payroll may continue for existing employees through automated systems, but new employment decisions stall.
- Real property transactions: Selling, mortgaging, or leasing LLC-owned real property requires manager authorization. A pending real estate closing fails if the manager dies before the deed is signed.
- Legal proceedings: Filing or defending lawsuits, retaining legal counsel, and accepting service of process require someone with authority to act on the company’s behalf. Without a manager, the LLC cannot effectively participate in its own legal defense.
Georgia probate takes 9 to 18 months for a standard estate. For a manager-managed LLC with no succession plan, that is the minimum window during which all of these operations are impaired. For a detailed look at what that costs, see What It Costs to Die Without a Business Succession Plan in Georgia.
How the Successor Manager Gets Appointed
The operating agreement controls successor manager appointment. If it is silent, Georgia’s default LLC rules apply — and those defaults require a member vote.
In a multi-member LLC where the members have voting rights, they can vote to appoint a new manager. But if the operating agreement requires unanimous consent or a supermajority, and one of the voting members is the deceased manager’s heir (who holds only assignee rights and cannot vote), reaching the required threshold may be impossible without a court order.
The process then goes to probate court: the estate petitions for authority, the court appoints a personal representative, and the personal representative eventually exercises the membership rights of the estate. This process takes months and costs money — while the LLC remains unable to operate at full capacity.
In a single-member LLC where the manager and the sole member are the same person, the situation is worse. There are no remaining members to vote. The estate inherits assignee rights, not member rights. Appointing a successor requires a court proceeding with no clear statutory roadmap. For more on what this looks like in practice, see What Happens to a Georgia Business When the Owner Dies Without a Succession Plan.
What Your Operating Agreement Must Say
Three specific provisions prevent the management paralysis described above. Every manager-managed Georgia LLC operating agreement should include all three.
1
Automatic Successor Manager Designation
Name a specific successor manager who takes over immediately at the current manager’s death or incapacity, without requiring a member vote. The successor should be identified by name and role — not just described as “a majority of members shall elect.” A vote-based succession requires the very process that breaks down at death. An automatic designation does not.
2
Full Authority Confirmation for the Successor
Explicitly state that the successor manager has the same full management authority as the original manager from the moment the trigger event (death, incapacity) occurs. Without this language, the successor’s authority may be challenged by banks, vendors, or other members. Banks in particular require clear documentation before accepting a new authorized signatory. Ambiguous authority language creates the same banking freeze as no succession plan at all.
3
Trust-Ownership Integration Clause
If the manager holds their membership interest through a revocable living trust (the recommended structure), the operating agreement must explicitly authorize the trustee to exercise all member and manager rights. Without this clause, the trustee may hold the economic interest but lack the authority to act as manager — creating the same gap through a different mechanism. The trust and the operating agreement must be drafted together, not independently.
The Single-Member Manager-Managed LLC — A Special Case
When the single member and the manager are the same person, the death creates the most dangerous configuration possible: an absolute vacuum. No one has authority. No one can vote to appoint a successor. The heirs inherit assignee rights with no path to governance.
Georgia law does not provide a statutory mechanism to fill this vacancy without court involvement. The estate goes through probate. The personal representative eventually gains the right to exercise membership rights. But until that happens, the LLC is ungoverned and the personal representative has no authority to act as manager.
The solution requires two components working together. First, the operating agreement must designate a specific successor manager by name — someone who takes over immediately at the manager-member’s death, before probate begins. Second, the membership interest must be held in a revocable living trust, so the trustee steps in immediately at death with authority to exercise both member and manager rights without waiting for probate.
Without both components in place, a single-member manager-managed LLC is one death away from a court proceeding. For a complete overview of all the documents a Georgia business owner needs, see Best Estate Planning for Business Owners in Georgia.
For pricing on building a complete succession plan, see How Much Does Business Succession Planning Cost in Georgia.
