Louisiana Legislature tweaks rules for single-member LLCs

LLC governing documents addressing a gap in Louisiana LLC law.

Many legal commentators have pointed out for some time that Louisiana limited liability company (LLC) law had a significant gap relating to LLCs with only one member – specifically, heirs or legatees of the sole member were not given full rights to continue the LLC after the death of the sole member under default state law.  Effective August 1, 2022, Louisiana Act 156 now fills this gap.

Before the new law was put in place, the succession representative of a deceased sole member was treated only as an assignee of the LLC membership interests.  Under LLC law, an assignee does not have all of the rights that a full member of an LLC has – for example, the assignee does not have the authority to manage the company, make distributions or wind up the company.  If there was only one member of the LLC to begin with and that member died, only an assignee (and no member) would remain meaning that no one had the authority to administer the LLC itself.  Savvy sole members would ensure they had a provision in place in the governing documents of the LLC to address this gap, but for those who relied on the default provisions of Louisiana LLC law, the LLC could be considered to be in a form of purgatory after the death of the sole member.   

After August 1, 2022, a deceased sole member’s succession representative may exercise all of the deceased member’s rights for the purpose of administering the member’s estate, including the financial and management rights.  Further, after a judgment of possession transfers the deceased member’s LLC interests, the heir or legatee will have full rights of membership in the LLC, including all financial and management rights.  

As with many provisions under Louisiana LLC law, a member still has the flexibility to modify this default rule through its articles of organization or a written operating agreement.  As laws can change, we recommend that all members of an LLC have a plan for the future of the LLC and ensure that the LLC’s governing documents are set up to carry out that plan. 

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