Main Line: 479.443.2705
Fax Line: 479.443.2718
Email: info@rmp.law
Bentonville – 479-553-9800
Jonesboro – 870-394-5200
Little Rock – 501-954-9000
Main Line: 479.443.2705
Fax Line: 479.443.2718
Email: info@rmp.law
Bentonville – 479-553-9800
Jonesboro – 870-394-5200
Little Rock – 501-954-9000
On Tuesday, the Federal Trade Commission issued a new Rule putting an end to employment-related non-compete clauses. In its justification for the rule, the FTC called non-compete clauses “an unfair method of competition” and stated it is a “violation for [employers] to… enter into non-compete clauses (“non-competes”) with workers.” In today’s very competitive labor market, the new FTC Rule creates a significant disruption for employers.
This new FTC provision—set to take effect in 120 days—renders existing non-compete agreements unenforceable. Existing non-compete agreements with senior executives will remain enforceable, although employers cannot require newly hired senior executives to sign such an agreement.
After the Rule takes effect, employers are required to deliver personal notice to employees (past and present) who signed a non-compete agreement informing them agreements are no longer enforceable. In the notice, employers must inform employees they are free to accept any job or start any business, even if it is directly competitive with the employer.
Compliance with the FTC Rule is not optional. Employers should consider new ways they can protect against a former employee gaining a competitive advantage by using the employer- provided training, the relationships made possible by the employer, or the confidential information learned from the employer. RMP can assist you in navigating this disruption and can provide advice on how to most effectively protect your vital business interests going forward.
RMP Attorneys At Law has an experienced Employment Law Attorney team dedicated to helping you navigate these changes. If you have any questions or would like guidance, reach out to one of our employment attorneys, Tim Hutchinson, Seth Haines, Larry McCredy, or Taylor Baltz or call 479.443.2705.
For many Arkansas business owners, an LLC is more than a legal entity. It may represent years of work, essential family income, valuable real estate holdings, loyal employees, long-standing customer relationships, hard-earned reputation, and long-term value.
But what happens to that LLC if an owner dies?
The answer depends on several factors, including how the LLC is owned, what the operating agreement says, whether there is a buy-sell agreement, whether the deceased owner had an estate plan, and whether probate is required. In some cases, the transfer is relatively straightforward. In others, the death of an LLC owner can create uncertainty for the surviving family, business partners, employees, and customers.
This guide explains what Arkansas LLC owners, families, and business partners should know before the death of an owner creates questions about ownership, authority, and control.
An LLC interest is not always as simple as other assets can be. Unlike a bank account or personal possessions, an interest in an LLC may involve a number of different rights and factors that each must be addressed, including economic rights, management rights, member voting rights, transfer restrictions, tax obligations, and other responsibilities under an operating agreement.
That distinction matters.
For example, a family member may inherit the economic value of an LLC interest, but that does not always mean the family member automatically receives the right to manage the company, vote on company decisions, access company records, or otherwise step into the deceased owner’s role.
The company’s operating agreement, Arkansas law, and the deceased owner’s estate plan all need to be reviewed together to determine the path forward when a member of an LLC dies.
The first document to review after a person with an interest in an LLC dies is usually the operating agreement.
An operating agreement can provide important insight on a number of questions. Perhaps most importantly, it should indicate how the decedent owned the membership interest—in his or her individual name, in a trust, or through another entity. Once it has been determined how the interest is held, the operating agreement may explain what happens upon the decedent’s death. It may address whether the deceased member’s interest can transfer to a spouse, child, trust, estate, co-owner, or third party. It may also include restrictions on transfers, buyout rights, valuation procedures, management rules, and dispute resolution provisions, all of which may become relevant upon a member’s death.
Important questions include:
If the operating agreement is missing, outdated, unclear, or inconsistent with the estate plan, the situation can quickly become more complicated.
In many situations, there is a difference between receiving the economic value of an LLC interest and receiving full membership rights.
Economic rights may include the right to receive distributions or the value of the deceased owner’s interest. Membership rights may include voting rights, access to records, and authority to participate in company operations.
An heir or beneficiary may assume they are stepping into the deceased owner’s shoes completely. The other members may disagree. The operating agreement must be reviewed to determine what rights can transfer. If the operating agreement is silent, state law will control, with potentially unexpected results
That is why LLC succession planning should be handled proactively, before a crisis occurs, to ensure all interested parties are on the same page. If the owner wants a spouse, child, key employee, or co-owner to take over, that intention should be agreed upon in advance among the business partners and clearly documented in the operating agreement and/or other company documents.
A single-member LLC may seem simple because there are no other owners to negotiate with. However, the death of a single owner can also create major issues if no succession plan exists.
Questions may include:
If the LLC is part of a probate estate, the probate process can cause delays which affect the business. Even short periods of uncertainty can create problems with payroll, customers, contracts, licensing, insurance, real estate, and other more immediate business needs.
For multi-member LLCs, the death of an owner can raise questions between the deceased owner’s family and the surviving members.
The family may wish to remain involved in the business, or they may instead want to receive value for the ownership interest. The surviving members may be open to the family being involved, or they may want to keep control of the company. In any case, if there is no buy-sell agreement, both sides may be left trying to negotiate under pressure.
A buy-sell agreement can address:
Without a buy-sell agreement, the death of one owner can create tension between the business and the family. Not only can this tension ruin relationships outside of the business context, but the conflict can also affect operations if the uncertainty means no one knows who has authority to make decisions.
An LLC interest may become part of the deceased owner’s probate estate if it was owned individually and was not transferred through a trust, beneficiary arrangement, or other planning tool.
If probate is required, the personal representative may need to request authority to manage, transfer, sell, or value the LLC interest. This depends in part on what the terms of the decedent’s will say, but that process may involve court filings, notices to beneficiaries or other interested parties, creditor issues, and coordination with the LLC’s governing documents.
However, while court authority may be an important step in moving forward, probate does not automatically override the operating agreement. If the LLC agreement restricts transfers of membership interest or otherwise limits the rights of heirs, those restrictions may still matter.
Some business owners use a revocable living trust as part of their estate plan. If structured correctly, the trust may allow the LLC interest to escape probate and provide clearer instructions for management or transfer after death.
A trust may be useful when the owner wants to:
As with any estate planning tool, a trust should be coordinated with the LLC operating agreement. If the operating agreement requires member approval for transfers to trusts or otherwise restricts such transfers, those issues should be handled before the owner dies.
The death of an LLC owner may create tax questions for the decedent’s estate, heirs, surviving owners of the business.
Depending on the circumstances, issues may include:
Business owners should not wait until after death to consider these issues. Tax planning should be coordinated with estate planning, business succession planning, and the LLC’s governing documents.
Disputes can happen when interested parties have different expectations concerning the LLC following an owner’s death. This can include disputes between the family members of a deceased owner or disagreements between the family and the surviving LLC members.
Common disagreements include:
These disputes can become expensive and disruptive. Clear operating agreements, buy-sell provisions, coordinated estate planning documents, and agreed valuation procedures can reduce the risk of conflict.
Arkansas LLC owners should consider the following questions:
If the answers are unclear, the business may be vulnerable.
Many succession problems are preventable. Common mistakes include:
For business owners, estate planning should not be viewed as separate from business planning. The two must work together to achieve their full intended effect.
An LLC can be one of the most valuable assets in an Arkansas estate. It can also be one of the hardest assets to deal with if the owner did not plan ahead.
When an LLC owner dies, the people left behind may need to make decisions quickly to preserve the business. Employees still need to be paid. Customers still need service. Contracts still need to be fulfilled. Real estate still needs to be maintained. Taxes still need to be handled. Additionally, family members may need access to income the decedent historically brought home from the business, and they may quickly seek clarity as to their ongoing role in the business.
A strong succession plan helps reduce uncertainty. It can protect the company, the owner’s family, and the people who rely on the business.
You may want legal guidance if:
RMP Law assists Arkansas business owners, their families, fiduciaries, and companies with estate planning, business succession planning, probate or trust administration matters, real estate, tax planning, and related issues.
If you own an Arkansas LLC and have questions about what would happen to the business if something happened to you, contact RMP Law at 479-443-2705 or use our Message Us form.
Main RMP Number: 479-443-2705
Bentonville – 479-553-9800
Jonesboro – 870-394-5200
Little Rock – 501-954-9000
DISCLAIMER: The information provided on this website does not constitute legal advice. Instead, all information, content, and materials available on this site are for general informational purposes. Information on this website may not constitute the most up-to-date legal or other information. Readers of this website should contact their attorney to obtain advice with respect to any particular legal matter.
For many Arkansas business owners, an LLC is more than a legal entity. It may represent years of work, essential family income, valuable real estate holdings, loyal employees, long-standing customer relationships, hard-earned reputation, and long-term value.
But what happens to that LLC if an owner dies?
The answer depends on several factors, including how the LLC is owned, what the operating agreement says, whether there is a buy-sell agreement, whether the deceased owner had an estate plan, and whether probate is required. In some cases, the transfer is relatively straightforward. In others, the death of an LLC owner can create uncertainty for the surviving family, business partners, employees, and customers.
This guide explains what Arkansas LLC owners, families, and business partners should know before the death of an owner creates questions about ownership, authority, and control.
An LLC interest is not always as simple as other assets can be. Unlike a bank account or personal possessions, an interest in an LLC may involve a number of different rights and factors that each must be addressed, including economic rights, management rights, member voting rights, transfer restrictions, tax obligations, and other responsibilities under an operating agreement.
That distinction matters.
For example, a family member may inherit the economic value of an LLC interest, but that does not always mean the family member automatically receives the right to manage the company, vote on company decisions, access company records, or otherwise step into the deceased owner’s role.
The company’s operating agreement, Arkansas law, and the deceased owner’s estate plan all need to be reviewed together to determine the path forward when a member of an LLC dies.
The first document to review after a person with an interest in an LLC dies is usually the operating agreement.
An operating agreement can provide important insight on a number of questions. Perhaps most importantly, it should indicate how the decedent owned the membership interest—in his or her individual name, in a trust, or through another entity. Once it has been determined how the interest is held, the operating agreement may explain what happens upon the decedent’s death. It may address whether the deceased member’s interest can transfer to a spouse, child, trust, estate, co-owner, or third party. It may also include restrictions on transfers, buyout rights, valuation procedures, management rules, and dispute resolution provisions, all of which may become relevant upon a member’s death.
Important questions include:
If the operating agreement is missing, outdated, unclear, or inconsistent with the estate plan, the situation can quickly become more complicated.
In many situations, there is a difference between receiving the economic value of an LLC interest and receiving full membership rights.
Economic rights may include the right to receive distributions or the value of the deceased owner’s interest. Membership rights may include voting rights, access to records, and authority to participate in company operations.
An heir or beneficiary may assume they are stepping into the deceased owner’s shoes completely. The other members may disagree. The operating agreement must be reviewed to determine what rights can transfer. If the operating agreement is silent, state law will control, with potentially unexpected results
That is why LLC succession planning should be handled proactively, before a crisis occurs, to ensure all interested parties are on the same page. If the owner wants a spouse, child, key employee, or co-owner to take over, that intention should be agreed upon in advance among the business partners and clearly documented in the operating agreement and/or other company documents.
A single-member LLC may seem simple because there are no other owners to negotiate with. However, the death of a single owner can also create major issues if no succession plan exists.
Questions may include:
If the LLC is part of a probate estate, the probate process can cause delays which affect the business. Even short periods of uncertainty can create problems with payroll, customers, contracts, licensing, insurance, real estate, and other more immediate business needs.
For multi-member LLCs, the death of an owner can raise questions between the deceased owner’s family and the surviving members.
The family may wish to remain involved in the business, or they may instead want to receive value for the ownership interest. The surviving members may be open to the family being involved, or they may want to keep control of the company. In any case, if there is no buy-sell agreement, both sides may be left trying to negotiate under pressure.
A buy-sell agreement can address:
Without a buy-sell agreement, the death of one owner can create tension between the business and the family. Not only can this tension ruin relationships outside of the business context, but the conflict can also affect operations if the uncertainty means no one knows who has authority to make decisions.
An LLC interest may become part of the deceased owner’s probate estate if it was owned individually and was not transferred through a trust, beneficiary arrangement, or other planning tool.
If probate is required, the personal representative may need to request authority to manage, transfer, sell, or value the LLC interest. This depends in part on what the terms of the decedent’s will say, but that process may involve court filings, notices to beneficiaries or other interested parties, creditor issues, and coordination with the LLC’s governing documents.
However, while court authority may be an important step in moving forward, probate does not automatically override the operating agreement. If the LLC agreement restricts transfers of membership interest or otherwise limits the rights of heirs, those restrictions may still matter.
Some business owners use a revocable living trust as part of their estate plan. If structured correctly, the trust may allow the LLC interest to escape probate and provide clearer instructions for management or transfer after death.
A trust may be useful when the owner wants to:
As with any estate planning tool, a trust should be coordinated with the LLC operating agreement. If the operating agreement requires member approval for transfers to trusts or otherwise restricts such transfers, those issues should be handled before the owner dies.
The death of an LLC owner may create tax questions for the decedent’s estate, heirs, surviving owners of the business.
Depending on the circumstances, issues may include:
Business owners should not wait until after death to consider these issues. Tax planning should be coordinated with estate planning, business succession planning, and the LLC’s governing documents.
Disputes can happen when interested parties have different expectations concerning the LLC following an owner’s death. This can include disputes between the family members of a deceased owner or disagreements between the family and the surviving LLC members.
Common disagreements include:
These disputes can become expensive and disruptive. Clear operating agreements, buy-sell provisions, coordinated estate planning documents, and agreed valuation procedures can reduce the risk of conflict.
Arkansas LLC owners should consider the following questions:
If the answers are unclear, the business may be vulnerable.
Many succession problems are preventable. Common mistakes include:
For business owners, estate planning should not be viewed as separate from business planning. The two must work together to achieve their full intended effect.
An LLC can be one of the most valuable assets in an Arkansas estate. It can also be one of the hardest assets to deal with if the owner did not plan ahead.
When an LLC owner dies, the people left behind may need to make decisions quickly to preserve the business. Employees still need to be paid. Customers still need service. Contracts still need to be fulfilled. Real estate still needs to be maintained. Taxes still need to be handled. Additionally, family members may need access to income the decedent historically brought home from the business, and they may quickly seek clarity as to their ongoing role in the business.
A strong succession plan helps reduce uncertainty. It can protect the company, the owner’s family, and the people who rely on the business.
You may want legal guidance if:
RMP Law assists Arkansas business owners, their families, fiduciaries, and companies with estate planning, business succession planning, probate or trust administration matters, real estate, tax planning, and related issues.
If you own an Arkansas LLC and have questions about what would happen to the business if something happened to you, contact RMP Law at 479-443-2705 or use our Message Us form.
Main RMP Number: 479-443-2705
Bentonville – 479-553-9800
Jonesboro – 870-394-5200
Little Rock – 501-954-9000
DISCLAIMER: The information provided on this website does not constitute legal advice. Instead, all information, content, and materials available on this site are for general informational purposes. Information on this website may not constitute the most up-to-date legal or other information. Readers of this website should contact their attorney to obtain advice with respect to any particular legal matter.
Main Line: 479.443.2705
Fax Line: 479.443.2718
Email: info@rmp.law
Bentonville – 479-553-9800
Jonesboro – 870-394-5200
Little Rock – 501-954-9000
JOHNSON
5519 Hackett Street, Suite 300
Springdale, AR 72762
BENTONVILLE
809 SW A Street, Suite 105
Bentonville, AR 72712
JONESBORO
710 Windover Road, Suite B
Jonesboro, AR 72401
LITTLE ROCK
17901 Chenal Parkway, Suite 200
Little Rock, AR 72223