You built the business over years. Your family may depend on it, and so may your employees, clients and partners. Yet many owners have a thoughtful plan for their home and no plan for the company.
This guide explains, in general terms, what can happen to a Texas business at death or incapacity, and how a strategy-first plan closes the gaps. It is general information, not advice for your situation.
What happens to an LLC interest when the owner dies?
An LLC membership interest is personal property. At death it does not vanish. It becomes part of your estate, and what happens next depends on two things: Texas default rules and your company agreement.
Without a plan, the interest usually passes under your will or, if there is no will, under Texas intestacy rules. That often means probate. Your heirs may then hold an economic interest in a company they never chose to own and do not know how to run.
The company agreement can change many of those defaults. It can restrict who may become a member, limit transfers, and set what happens to an interest at death. That is why we read it early in every business-owner plan.
Why your company agreement matters
Many Texas LLCs operate on a template agreement that was never revisited. Two clauses deserve a close look:
- Transfer restrictions. These may limit who can receive your interest, and whether a transferee gets full membership or only a right to distributions.
- Buy-sell provisions. These set whether the other owners or the company can, or must, purchase your interest, and how it is valued.
If the agreement is silent or outdated, your family and your co-owners may be negotiating at the worst possible time.
The single-member LLC risk
If you are the only member and only manager, the business depends on you completely. If you become incapacitated, who can sign checks, renew contracts, meet payroll or talk to the bank?
Without a named successor, your family may need a court process to step in. The business can stall while that happens. Single-member owners often assume the LLC protects them. The entity protects against some liabilities. It does not plan for you.
Holding your interest in a revocable trust
Many owners assign their membership interest to a revocable living trust. Done correctly, this can keep the interest out of probate and name who steps in if you cannot act.
Two cautions. First, the company agreement must permit the transfer, so it may need to be amended. Second, banks, lenders, landlords and licensing bodies may have their own requirements. We coordinate those details so the assignment actually works.
For background on trusts generally, see our guide to will vs. living trust in Texas.
Buy-sell agreements, with or without insurance
A buy-sell agreement is a contract among owners about what happens when one leaves, dies or becomes disabled. It can fix who may buy, how the price is set, and how it is paid.
Many owners fund the purchase with life insurance so the money exists when it is needed. The surviving owners get certainty. Your family receives value for the interest rather than a stake they cannot easily sell. Funding structures have tax and legal consequences, so we design them alongside your CPA.
A durable power of attorney that reaches the business
A general durable power of attorney may not give your agent the authority you actually want over the company. We draft business authority deliberately, and we align it with the company agreement so the two do not conflict.
Some owners also name a separate agent for business decisions, so personal and business roles are handled by the people best suited to each.
Key-person and successor-manager planning
Ownership and management are different questions. The person who inherits your interest may not be the person who should run the company.
We help you decide:
- Who manages the business if you are incapacitated, and who after your death
- Whether a family member, partner or trusted employee steps in
- How that person is given authority, guidance and, where appropriate, compensation
- What your family receives if someone else runs the company
Written instructions for vendors, accounts, passwords and key relationships often matter as much as any legal document.
Working with your CPA and business attorney
Your estate plan should not operate in isolation. Entity structure, tax elections, valuation and insurance all affect the plan. We work with your CPA, your business attorney and your financial advisor so every document points the same direction.
This is also why the plan begins with strategy. In your Alers Legacy Strategy Session, we map your entities, your owners and your family goals before any drafting starts. Our full approach is on the estate planning process page, and an overview is on our estate planning page.
Business owner readiness checklist
- Do you have a current, signed company agreement or operating documents for every entity?
- Does it say what happens to your interest at your death or incapacity?
- Does it allow you to assign your interest to a revocable trust?
- Is there a buy-sell agreement among owners, and is it current?
- If it is funded with insurance, is the coverage in place and matched to the agreement?
- Does your durable power of attorney address business authority?
- Have you named a successor manager and a backup?
- Can your family or successor find your entity records, accounts and key contacts?
- Have your CPA, business attorney and estate planning attorney reviewed the plan together?
- Have you reviewed everything since your last ownership, tax or family change?
If several answers are "no" or "not sure," that is a useful starting point, not a problem.
Serving North Texas business owners
We work with LLC members, S-corporation owners, professional practices and family businesses across Collin and Denton Counties. See our pages for Frisco and Prosper. Se habla español.
Book your Alers Legacy Strategy Session
Not sure where to start? Schedule a free 15-minute discovery call with our team.
FAQs
What happens to my LLC when I die in Texas?
Your membership interest becomes part of your estate. It generally passes under your will or Texas intestacy rules, subject to your company agreement. Without planning, that can mean probate and uncertainty for your co-owners and family.
Does a revocable trust protect my business?
Holding your membership interest in a revocable trust can help avoid probate and name who acts if you cannot. The company agreement must allow the transfer, and the plan should be coordinated with your lender and advisors.
What is a buy-sell agreement?
It is a contract among owners that sets what happens to an interest at death, disability or departure, including who may buy it and how it is valued. Many owners fund it with life insurance.
What if I am the only owner and become incapacitated?
Someone must have legal authority to act for you and for the company. A durable power of attorney with business authority and a named successor manager can help avoid a court process and a stalled business.
Do I need to involve my CPA and business attorney?
Yes. Tax elections, entity structure, valuation and insurance all affect the plan. We coordinate with your advisors so your documents work together.