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Birmingham Bar Association Bulletin

LLC Act Taking Value From A Law Firm LLC In The Afterlife The statutory procedure follows a series of sequential steps, as follows: First, the member dies. Second, within six months of the death, the LLC must make a written off er to pay the holder of the deceased member’s interest (the decedent’s estate or transferee) “a specifi ed price deemed by the LLC to be the fair value of the transferable interest as of the date of the death.” Th e off er must be accompanied by a recent balance sheet and profi t and loss statement of the LLC. Third, the decedent’s estate or transferee has 30 days to agree or disagree with the LLC’s written off er. Fourth, if the decedent’s estate or transferee agrees to the off er, then the LLC shall make payment within 90 days of the date of the off er or within such other time as the parties may agree. Upon receipt of the payment, the decedent’s estate or transferee shall cease to have any interest in the LLC. Fifth, if the decedent’s estate or transferee does not agree to the off er, then either party may commence a civil action in the circuit court in which the LLC is located, requesting that the court determine the fair value. Th e court may appoint one or more appraisers to receive evidence and recommend a decision on the question of fair value. Sixth, once the court has determined the fair value, the decedent’s estate or transferee shall be entitled to a judgment against the LLC for the amount of the fair value, plus interest at the rate the court fi nds to be fair and equitable. Th e court, in its discretion, may order that the judgment be paid in installments. Seventh, the court shall assess costs and expenses against the parties in a manner the court deems equitable. Th e court is granted discretion to shift attorney and expert fees from one party to the other if the court-determined fair value materially diff ers (higher or lower) from the LLC’s pre-litigation off er. If your LLC company agreement already provides a procedure for valuation and purchase upon a member’s death, then the statutory procedure should be of no concern to you. If your company agreement is silent, do you like the thought of your estate possibly being forced into litigation with your former law partners? Do you believe the court will reach the right decision on the “fair value” of LLC assets like your pending contingency cases? If you feel that way, then the statutory procedure is perfect for you. If not, it may be time to talk with your law partners and update your fi rm’s company agreement. Taking care of the issue now may be much better than letting it drag into the afterlife. G Gregory A. Brockwell, Contributor Birmingham Bar Bulletin/ Spring 2018 11


Birmingham Bar Association Bulletin
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