Arkansas — What Happens to an LLC Member's Share When They Die?

Detailed Answer

Short answer: If your Arkansas LLC’s operating agreement is silent about what happens to a member’s interest on death, Arkansas default LLC law and the LLC’s articles of organization control. In practice, the deceased member’s estate or personal representative typically inherits the economic (financial) rights but not the managerial rights, and the estate will need other members’ consent to become a continuing member. The LLC can usually continue to operate without interruption, but without clear buy‑sell language disputes, the estate may need to negotiate a sale or seek a court remedy.

How membership interests are treated by default

Under modern LLC law (including Arkansas law governing business organizations), a member’s interest is generally split into two parts: (1) the economic or transferable interest (the right to receive distributions and share in liquidation proceeds) and (2) the membership or management rights (voting, participation in control, and other governance rights). When a member dies:

• The deceased member’s transferable (economic) interest typically passes to the decedent’s estate or heirs and can be collected by the personal representative. That means the estate can receive distributions that would otherwise go to the member.
• The management or membership rights (the right to participate in management, vote, and be admitted as a member) usually do not automatically pass to the estate or heirs. The heirs or personal representative normally must be admitted as a new member under the LLC’s operating agreement or with the consent of the other members.

What that looks like in practice

If the operating agreement says nothing about death, you will likely see one of these outcomes:

• The LLC continues with the remaining members managing the business. The estate is treated as a transferee of the deceased member’s economic interest and receives any distributions due, but it does not participate in management unless admitted as a member.
• The members negotiate a buyout: the LLC or the surviving members buy the estate’s economic interest for an agreed price or by a valuation method. A buy‑sell provision in a formal operating agreement or a life‑insurance funded buyout makes this cleaner—without it, parties must negotiate value and terms.
• If members cannot agree and the deceased member’s interest materially affects control (for example, in a two‑member LLC where one dies), the estate or other members may seek judicial relief. Remedies can include judicial dissolution, appointment of a receiver, or a court‑ordered buyout under applicable Arkansas law.

Arkansas law and where to look

Arkansas’s statutory provisions for business organizations and limited liability companies set the default rules that apply when an operating agreement is silent. For the official text and to read the LLC provisions yourself, see Arkansas Code — Title 4 (Business Organizations), the chapters covering limited liability companies. You can browse those provisions on the Arkansas Legislature website: Arkansas Code: Title 4 (Business Organizations). For practical filing and entity questions, the Arkansas Secretary of State has guidance for LLCs: Arkansas Secretary of State — Business & Commercial Services.

Probate and documents you will need

• The estate’s personal representative (executor or administrator) will need letters testamentary or letters of administration to act on behalf of the estate.
• The LLC will typically request a certified death certificate and proof of the representative’s authority before paying distributions to the estate.
• If the estate or heirs seek admission as members, expect to provide a written request, possibly submit to background checks, and obtain unanimous or majority consent per the operating agreement or state default rules.

Taxes and valuations

Death can trigger tax and valuation issues that affect both the estate and the LLC. The estate will need a fair market valuation of the deceased member’s economic interest for estate tax purposes, for negotiating buyouts, and for preparing final tax returns. Consult a tax professional early.

Helpful Hints

• Review your operating agreement and articles of organization now. If they contain buy‑sell, transfer, valuation, or death provisions, follow them strictly.
• If the operating agreement is silent, get the estate’s personal representative (executor) to gather certified death certificate and letters testamentary/administration before requesting distributions.
• Do not assume heirs automatically become members. Most LLC statutes treat transferees as owners of economic rights only until admitted as members by consent.
• Negotiate a buyout early. Estates often prefer cash-out rather than ongoing involvement in a business they did not manage.
• Consider updating the operating agreement to add a buy‑sell provision, right of first refusal, valuation method, and life‑insurance funding to avoid future disputes.
• Talk to both an estate attorney and a business attorney experienced with Arkansas LLCs to coordinate probate, transfer, valuation, tax issues, and admission or buyout terms.
• Keep clear records of membership units, capital accounts, distributions, and any consent or meeting minutes that address the deceased member’s interest.
• If relations break down, Arkansas statutes allow court intervention. A judge can order dissolution, a buyout, or other relief depending on the facts. Litigation is costly—mediation is usually a faster, cheaper option.

Next steps: If you face this situation now, gather the LLC’s operating agreement and articles, obtain the deceased member’s death certificate, and speak with an Arkansas estate attorney and business/LLC attorney. They can confirm the applicable statutory rules, help obtain letters for the estate, and negotiate or litigate admission or buyout if needed.

Disclaimer: This article provides general information about Arkansas LLC practice and is not legal advice. It does not create an attorney‑client relationship. For advice about your specific situation, consult a licensed Arkansas attorney who can analyze your facts and applicable law.