Colorado: Can a Will Transfer My LLC Interest or Override the Operating Agreement? | Colorado Estate Planning | FastCounsel
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Colorado: Can a Will Transfer My LLC Interest or Override the Operating Agreement?

August 18, 2025 6 min read

Detailed Answer

This article explains how a deceased owner’s will interacts with an LLC operating agreement under Colorado law and what typically happens when a will attempts to transfer an LLC interest to an heir.

Which document controls: the operating agreement or the will?

Under Colorado law, the LLC’s governing documents (the articles of organization and, especially, the operating agreement) and state LLC statutes normally control who owns and who manages LLC interests. An owner’s will cannot unilaterally override contractual transfer restrictions or buy‑sell rules that the owner agreed to while alive.

Key principles you should know:

  • Operating agreements are contracts among members. If the operating agreement contains clauses that limit transfers, require member approval, or require the company or the remaining members to buy the interest on death, those provisions will generally be enforceable against the decedent’s estate.
  • Colorado’s LLC law recognizes the distinction between economic rights (the right to receive distributions) and governance rights (the right to vote or be admitted as a member). In many LLC statutes, a transferee of a member’s economic interest does not automatically become a member with management rights without the consent of the other members.
  • If the will attempts to give an LLC interest in a way that contradicts the operating agreement, the estate may be limited to the economic value of the interest (a buyout or distributions) rather than full membership or management control.

Relevant Colorado law and where to look

Colorado’s statutes on business organizations and estate law are the starting point. See the Colorado Revised Statutes (Title 7 for business organizations and Title 15 for estates) for the text of the LLC and probate provisions. Useful official links:

How this plays out in common situations (hypothetical facts)

Example 1 — Operating agreement requires member consent for new members: Dead owner’s will leaves 100% of their interest to their son. If the LLC’s operating agreement says a transferee must be approved by the remaining members to become a member, the son likely receives only the economic interest (right to distributions) but not the membership or voting rights unless the members agree to admit him. The son can still collect distributions that flow to the estate or to him if admitted, but he usually cannot take control simply by the will.

Example 2 — Operating agreement has a buyout on death: If the agreement states the company or the remaining members must purchase a deceased owner’s interest at a formula price or fair value, the estate will generally be entitled to the buyout proceeds rather than a continuing membership interest in the LLC.

Example 3 — Single-member LLC with no restrictions: If the decedent was the sole member and the operating agreement or state law permits transfer on death, the will may transfer the membership interest and the heir may become the new sole member. Even then, check the LLC’s formation documents and any assignment provisions.

Practical steps to take if you want to leave an LLC interest to a family member

  1. Review the operating agreement and articles of organization immediately. Look for transfer restrictions, death/buyout clauses, and admission-of-new-member rules.
  2. Talk with the LLC’s manager or other members to understand how they will treat a transfer on death and whether they will admit the heir as a member.
  3. Consult an estate attorney and a business/LLC attorney — they can coordinate estate planning documents (wills, trusts, buy‑sell agreements) with the operating agreement to reach your goals.
  4. Consider alternatives such as lifetime gifting (if tax and consent rules allow), or amending the operating agreement to permit transfers at death or to name an approved successor.
  5. If you’re the executor, notify the LLC (provide death certificate and Letters Testamentary or probate documents) and follow the operating agreement’s procedures for transfer or buyout.

What heirs and executors should expect in probate

When an LLC owner dies, the executor or personal representative will handle the decedent’s property per the will and Colorado probate rules (Title 15). If the operating agreement requires a buyout, the estate may receive cash or a note. If the agreement allows transfer and the members admit the heir, the heir may become a member after required formalities. Expect to provide probate paperwork and to negotiate with the LLC or members if value or admission is contested.

When a will can effectively give the LLC interest

A will can transfer what the decedent had the legal power to transfer. If the operating agreement contains no restriction that prevents transfer on death, or if the other members consent to admitting the heir, then the will may succeed in passing both economic and management rights. If the LLC is single-member and the governing documents or statute allow transfer, the heir may take ownership through probate.

When the will cannot override the operating agreement

If the operating agreement includes a valid, enforceable restriction (e.g., a right of first refusal, buy‑sell provision, or requirement of member consent), the will cannot defeat those contractual terms. The estate’s remedy is typically monetary (value of the interest) or to seek admission of the heir under the operating agreement’s procedures.

How to avoid disputes before death

  • Amend the operating agreement if you want to guarantee admission of a named successor.
  • Set up a trust that owns the membership interest so successor ownership is clearer and may avoid probate delays.
  • Create a buy‑sell agreement that sets clear valuation and transfer terms on death, disability, or retirement.

Helpful Hints

  • Start by reading the operating agreement: It often answers the transfer-on-death question directly.
  • Distinguish between economic rights (distributions) and management rights (membership/votes) — they can pass differently.
  • Look for buyout formulas, appraiser rules, or timing windows in the agreement — those rules frequently control what the estate receives.
  • If you want your heir to run the business, get the members’ consent or amend the operating agreement now rather than relying on a will alone.
  • Consider using a revocable trust to transfer the interest at death if you want to avoid probate or to control admission conditions.
  • Document communications with other members and the LLC — disputes are easier to resolve with clear records.
  • Ask for certified copies of the articles and operating agreement from the company or the Colorado Secretary of State if you don’t have originals.

Resources

Next steps

If you are planning your estate and want your child to receive and operate an LLC interest, talk to an estate attorney and a business attorney in Colorado. They can review the operating agreement, advise whether a will alone will achieve your goals, and prepare the proper documents (amendments, trust agreements, or buy‑sell agreements) to make your intentions effective.

Disclaimer: This article is for general informational purposes only and is not legal advice. It does not create an attorney‑client relationship. For advice about specific facts, consult a licensed Colorado attorney.

The information on this site is for general informational purposes only, may be outdated, and is not legal advice; do not rely on it without consulting your own attorney.