Your LLC operating agreement controls what happens when a member dies, becomes incapacitated, or exits the business. Most operating agreements — especially ones generated by a registered agent service or based on a state-provided template — don’t do this well.
Here are the five most common succession problems in Georgia LLC operating agreements, and what a properly drafted amendment should address.
Problem 1: The Agreement Is Silent on Member Death
Many operating agreements say nothing about what happens when a member dies. When the agreement is silent, Georgia LLC law controls — and Georgia law doesn’t automatically transfer management authority to heirs. The deceased member’s estate may have economic rights (the right to receive distributions) but not management rights (the right to vote or manage).
The result: a probate estate as an economic stakeholder, no clear management authority, and surviving members who can’t make binding decisions without legal exposure.
The fix: draft a provision that explicitly states what happens at a member’s death — whether the membership interest transfers to the estate, to a trust, to surviving members, or to a designated successor.
Problem 2: The Agreement Dissolves the LLC on a Member’s Death
Some older operating agreements contain a dissolution clause that triggers automatically when a member dies. This was a default provision in older Georgia LLC law and made its way into templates that have never been updated.
In practice, most LLCs don’t actually dissolve when this happens — the surviving members continue operating and never file a formal dissolution. But the provision creates legal ambiguity, potential tax problems, and exposure if a dispute arises later.
The fix: remove the automatic dissolution provision and replace it with a clear succession mechanism.
Problem 3: Transfer Restrictions Block Trust Funding
Many operating agreements restrict membership transfers without unanimous consent of all members. This restriction is designed to prevent an owner from selling to a stranger — but it can also block a member from transferring their interest to their own revocable living trust.
If you want to hold your LLC interest in a trust (which you should), and your operating agreement requires all members to consent to any transfer, you need an amendment that carves out transfers to revocable trusts as “permitted transfers” that don’t require consent.
Problem 4: No Designation of Successor Management
Even when an operating agreement addresses the transfer of membership interests, it often doesn’t address management succession — who runs the LLC when the managing member is gone.
In a member-managed LLC, all members have management authority. If the managing member dies and the interest goes to an estate or trust, the successor may have economic rights but unclear management rights until the estate or trust is formally recognized as a member.
In a manager-managed LLC, the manager role needs to explicitly address succession: who becomes manager if the current manager dies or becomes incapacitated, and what process is required.
Problem 5: The Agreement Doesn’t Align With the Estate Plan
Even when an operating agreement has succession provisions, those provisions may conflict with the member’s estate plan. Common conflicts:
- The operating agreement names a specific person as successor, but the revocable trust names a different person
- The trust attempts to transfer the LLC interest, but the operating agreement requires a formal membership certificate that was never issued
- The buy-sell agreement requires a buyout at death, but the operating agreement’s transfer restrictions prevent the trust from completing the sale
All three documents — the operating agreement, the trust, and the buy-sell agreement — need to be reviewed together and made consistent with each other.
What a Proper Operating Agreement Amendment Covers
An operating agreement amendment that addresses succession should:
- Permit transfers to revocable living trusts as permitted transfers without member consent
- Address what happens to management authority when a member dies
- Remove automatic dissolution provisions
- Align with any buy-sell agreement provisions
- Identify the successor trustee as having full management authority when acting on behalf of a trust-member
When to Review Your Operating Agreement
If your LLC was formed more than three years ago, your operating agreement was probably drafted at formation and never reviewed. If your personal estate plan has changed since then — you’ve married, divorced, had children, or created a trust — there’s a good chance your operating agreement and your estate plan are out of alignment.
The LLC Operating Agreement Review page explains what a review covers. If you’re ready to talk through your specific situation, book a Family Protection Audit.