When a business owner dies: how a will interacts with an LLC operating agreement in Texas

Short answer: In Texas the operating agreement usually controls how an LLC membership interest may be transferred at death. A will cannot unilaterally override valid transfer restrictions or contractual rules in the operating agreement. Your will can attempt to leave the economic value of your membership interest to someone (for example, a son), but that transfer will be subject to the LLC’s operating agreement, state statute, and any buy‑sell or consent requirements. See the Texas Business Organizations Code for rules governing LLCs: https://statutes.capitol.texas.gov/?link=BO and the Texas Estates Code for probate and testamentary rules: https://statutes.capitol.texas.gov/?link=ES.

Detailed answer — how Texas law treats membership interests, wills, and operating agreements

1. Membership interests are governed first by the operating agreement

An LLC member’s rights (management, voting, distribution rights, and how interests transfer) are primarily defined by the operating agreement that the members adopt. If the operating agreement contains transfer restrictions (for example, a right of first refusal, mandatory buy‑sell, or a consent requirement before any transfer), those contractual terms typically bind the member’s estate and any beneficiary named in a will.

2. What a will can and cannot do

• A will can direct your executor to transfer whatever property you own at death, including your membership interest (or what you are allowed to transfer). But the probate transfer cannot break a valid contract in place before death. If the operating agreement prohibits or limits transfers, the executor must follow those rules.
• In practice the estate often can transfer the economic component of the membership interest (rights to distributions and financial value), but the transferee usually will not gain management or voting rights unless the LLC’s governing documents and the other members permit admission of the transferee as a full member.
• If the operating agreement provides for a buy‑out on death (or gives other members a right to purchase the interest), the estate will typically have to comply with that process. The estate may receive cash or other consideration under the buy‑sell terms instead of full membership rights for the beneficiary.

3. Texas law supports contractual freedom for LLC governance

Texas’s Business Organizations Code allows members to set up the LLC’s internal rules by contract (an operating agreement). Courts generally enforce these agreements, so your estate plan must account for what those documents allow or require. Relevant materials are available through the Texas statutes site: https://statutes.capitol.texas.gov/?link=BO.

4. Practical result

If your will leaves your business interest to your son, the following outcomes are common under Texas law:

• If the operating agreement contains no transfer restrictions, your executor can transfer the full interest to your son under probate, and your son may step into your member rights.
• If the operating agreement contains transfer restrictions, your son may receive only the economic value (distributions) or may be treated as a transferee with limited rights until the other members consent to admit him as a member. The LLC may instead buy out the interest according to the agreement’s terms.
• If the LLC’s documents are ambiguous or conflict with the will, the executor and heirs should follow the operating agreement first and consult counsel to resolve disputes or to negotiate admission of the heir as a member.

How to make sure your son actually receives the business interest you intend

To ensure your wishes are effective under Texas law, consider one or more of the following planning steps:

1. Review the operating agreement now. Identify transfer restrictions, buy‑sell valuation methods, and consent or admission rules.
2. If current members agree, amend the operating agreement to permit transfer at death to your chosen beneficiary or to create an express succession mechanism.
3. Use a trust. Transfer your membership interest into a revocable trust during life and name your son as beneficiary. Trustees can be given authority to follow the LLC rules while keeping continuity for management and tax purposes.
4. Negotiate a buy‑sell agreement with other members that specifies what happens on death (e.g., mandatory purchase at a set formula), so there’s no dispute in probate.
5. Consider gifting the interest during life, if you want to avoid probate and the operating agreement allows transfers. Check tax and control consequences first.
6. Coordinate your will with the LLC documents. Work with an attorney to draft language that recognizes the operating agreement and describes what you want to happen subject to it (for example: assign to my son any transferable interest; if admission requires consent, authorize my executor to take steps necessary to obtain consent).

Steps your executor should take after your death

• Obtain a certified copy of the death certificate and a copy of the will.
• Provide notice to the LLC and review the operating agreement and any buy‑sell agreement immediately.
• Follow the agreement’s process for transfer, valuation, or buy‑out. If the agreement requires member approval to admit a new member, seek that approval promptly if the will directs admission.
• If there’s a dispute, preserve records and consult an attorney experienced in Texas business and probate law; avoid unilateral actions that could expose the estate to liability.

Where to look in Texas law

Key resources and official pages:

• Texas Business Organizations Code — statutes and chapters governing LLCs and member/transferee rights: https://statutes.capitol.texas.gov/?link=BO
• Texas Estates Code — probate, wills, and executor duties: https://statutes.capitol.texas.gov/?link=ES
• Texas Secretary of State — practical LLC filing and business information: https://www.sos.state.tx.us/corp/

Helpful Hints

• Don’t assume a will alone controls business succession. Check the operating agreement first.
• If you want your son to run the business, get member consent now or create a plan that gives him management rights after admission.
• Consider a trust to avoid probate delay and to provide clearer authority for managing or selling the interest.
• Document valuation methods and liquidity plans (how the estate will pay taxes and buy‑out provisions if other members want to purchase the interest).
• Talk with both an estate planning attorney and a business/LLC attorney. One lawyer may handle both, but both issues are important: estate distribution and contract enforcement under Texas Business Organizations law.

Disclaimer: This article provides general information about Texas law and is not legal advice. It does not create an attorney‑client relationship. For advice about your specific situation, consult a licensed Texas attorney who handles business succession and estate planning.