Your Operating Agreement Does Not Name a Successor Member or Manager
Georgia’s default LLC statute says that when a member dies, their interest passes to their estate as an economic interest only. The estate receives profit distributions but not voting or management rights.
If your operating agreement does not override this default — by naming who becomes the successor member and manager — your estate holds an interest it cannot exercise and your family cannot manage. The business has ownership without control, and control without a named successor.
This is the most common gap in operating agreements drafted at formation. The attorney who formed your LLC was focused on creating the entity, not on what happens when you die. Formation documents rarely include adequate succession provisions unless you specifically asked for them.
Your Trust Holds the LLC but the Operating Agreement Has Not Been Updated
A revocable living trust can hold an LLC membership interest. But if the operating agreement was not updated when the trust was created, the trustee has ownership without authority.
The operating agreement names the member. If it names you personally — not your trust — then your successor trustee is not the successor member. The operating agreement does not recognize them. They own the interest through the trust, but the operating agreement’s consent and voting provisions still reference you as the member.
This creates a legal gap at exactly the moment when a gap is most damaging. The trustee needs to act immediately to preserve the business. The operating agreement does not give them that right. The trust and the operating agreement must be updated at the same time, as a coordinated system.
Your Buy-Sell Agreement Has No Valuation Method
A buy-sell agreement that does not specify how the business is valued does not actually set a price — it sets a dispute.
When a triggering event occurs, the parties need to agree on what the business is worth before the buyout can proceed. Without a contractual valuation method — a fixed price updated annually, a formula based on revenue or EBITDA, or a certified appraisal — each side hires their own expert. The experts disagree. The disagreement becomes litigation.
Many buy-sell agreements drafted quickly or based on online templates include a price stub: “The purchase price shall be the fair market value of the interest as agreed by the parties.” That language is not a valuation method. It is a placeholder that forces negotiation at the worst possible time. A buy-sell agreement without a valuation method is not meaningfully better than having no agreement.
Your Buy-Sell Agreement Exists but Is Not Funded
An unfunded buy-sell agreement sets the price and process for a buyout but does not create the money to pay for it. When a triggering event occurs, the surviving owner knows exactly what they owe the estate — and has no way to pay it without taking on debt, selling assets, or finding outside investors.
The standard funding mechanism is life insurance: each owner holds a policy on the other owners, sized to cover the buyout price. When an owner dies, the death benefit funds the buyout. Without that mechanism in place, a well-drafted buy-sell agreement becomes an obligation the surviving owner cannot meet on the timeline the agreement requires.
Verifying that a buy-sell agreement is funded requires confirming that the policies exist, are in force, and are correctly owned and assigned. This should be reviewed every few years as the business value changes. An agreement funded for a $300,000 business is underfunded for a $700,000 business.
Your Plan Covers Death but Not Incapacity
Business succession documents most commonly address death. Incapacity — a stroke, a serious accident, a cognitive decline — is more common and more difficult to plan around, because the owner is still alive.
Without incapacity provisions, a business owner who becomes incapacitated creates the same operational problem as death but without the legal clarity. The owner is alive, so the estate does not open. But the owner cannot sign documents, make decisions, or authorize transactions.
A durable power of attorney authorizes a named agent to act on the owner’s behalf for personal financial matters. But it does not automatically give that agent authority to act as the manager of an LLC. The operating agreement must authorize the agent — or a named successor manager — to step into the management role when the owner cannot act. Without that provision, the business is leaderless without a legal mechanism to fill the gap.
Your Documents Were Drafted at Different Times and Conflict
A business owner who created an operating agreement in 2015, a personal estate plan in 2019, and a buy-sell agreement in 2022 has three documents that were drafted by different attorneys, at different stages of the business, with different assumptions about the business’s value and structure.
Those documents may conflict in ways that are not visible until a triggering event occurs. The operating agreement may restrict member transfers in a way that conflicts with the trust’s provisions. The buy-sell agreement may reference the operating agreement’s transfer restrictions without accounting for the trust’s ownership. The power of attorney may authorize actions that the operating agreement gives only to the manager — who is a different person than the agent named in the power of attorney.
Conflicts between documents are not resolved by whichever document is most recent. They are resolved by litigation. A plan review that identifies conflicts before they become disputes is significantly less expensive than litigation after they do.
Your Plan Has Not Been Reviewed Since the Business Changed
A succession plan that reflected the business correctly in 2018 may be significantly wrong in 2026. Business value changes. Ownership percentages change. Partners come and go. Key employees become essential. The business acquires real property or takes on significant debt.
Every one of those changes affects what the succession plan needs to do. A buy-sell agreement funded for a $400,000 business is wrong for a $1.2 million business. An operating agreement that names one successor manager is wrong if that person is no longer in the business. A trust that holds the membership interest may need to be updated if the business has been restructured.
The standard recommendation is to review business succession documents every 3 to 5 years or after any significant business event — a new partner, a major acquisition, a substantial increase in revenue or value. A plan that was correct at drafting is not a plan that stays correct without maintenance.
If you have existing business succession documents, a strategy call reviews whether they still reflect your current business structure and flags any gaps before they become a crisis.
