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#2277264 - 10/27/22 10:32 PM Deceased Member LLC
Banker23 Offline
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Joined: Aug 2018
Posts: 18
Business (LLC) has one member listed on the account along with an authorized signer. The member passes away and debits are restricted from the account. The attorney handling the estate provides a POA signed by the executor of this deceased member stating that they grant authority to handle all things related to that business to the authorized signer. It has always been our understanding that as executor you cannot designate someone else, and in the case it for the business not the person. Isn't it necessary to carry out the operating agreement of the business? Thoughts?

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Operations Compliance
#2277266 - 10/27/22 10:41 PM Re: Deceased Member LLC Banker23
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 80,358
Galveston, TX
You need to be talking to your own legal counsel, but the owner passing away does not impact the authority previously granted to the authorized signer. You restricting the account was a bad move on your part and could have subjected you to liability if the company failed because they were not able to access their funds.

Banks do not restrict accounts of business entities because a shareholder dies. The entity is not dead. It makes it sound like none of the parties involved know what they are doing smile
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#2277268 - 10/27/22 10:50 PM Re: Deceased Member LLC rlcarey
Banker23 Offline
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Joined: Aug 2018
Posts: 18
Thanks for your feedback. Yes, most certainly legal counsel should be notified, however if the authorized signer on the account is merely an employee of that business, you are saying that we should have allowed transactions to continue, such as withdrawals, etc. What if the money is depleted and that person has no rights in the operating agreement. The thought was to protect the funds and the business until we have documentation on who can legally transact on the account. Curious as to whether you think that should have been a concern?

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#2277282 - 10/28/22 01:53 PM Re: Deceased Member LLC Banker23
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 80,358
Galveston, TX
I assume that you have a corporate resolution appointing the authorized signer and it sets forth the authorities that the LLC granted that authorized signer. That corporate resolution was appropriately signed by an individual which (at that time) would be allowed to make that representation to the bank according to the corporate documentation.

Just because one or more of the shareholders of the LLC dies, it does not nullify those documents. The fact that there was only one shareholder in this case makes absolutely no difference. The LLC survives on its own, unless the corporate documents indicate that the LLC is immediately dissolved in the event of the death of the shareholder, which I cannot imagine. What the heirs need to do is figure out who is inheriting the stock of the LLC. Otherwise, the LLC just moves on with its business.

If the LLC needed to purchase some materials and you restricted their funds (like you said you did) and the LLC subsequently suffered a financial loss or a loos of profit opportunity, if I was one of the heirs, I would be seeing you in court.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#2277287 - 10/28/22 02:34 PM Re: Deceased Member LLC rlcarey
M Cockrell Offline
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M Cockrell
Joined: Jan 2003
Posts: 1,038
Dallas, TX
This would be different with a Sole Proprietorship, though, correct?
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#2277305 - 10/28/22 04:12 PM Re: Deceased Member LLC Banker23
RockChucker, CAMS Offline
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Joined: Jul 2013
Posts: 1,691
The Country
Possibly. The sole prop is essentially a "personal account" and belongs to the estate of the individual if no beneficiary is listed. But if there is an authorized signer on the account then you will need to look at your account disclosures to see what limitations you have put on authorized signers.
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#2277308 - 10/28/22 04:24 PM Re: Deceased Member LLC Banker23
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 80,358
Galveston, TX
If this is an individual operating a DBA/sole proprietorship, then any authorized signer authorization died with the individual - no different than if they had appointed a POA. Totally different than dealing with a separate legal entity, like a LLC or corporation.
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#2277312 - 10/28/22 05:25 PM Re: Deceased Member LLC rlcarey
M Cockrell Offline
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M Cockrell
Joined: Jan 2003
Posts: 1,038
Dallas, TX
Thank you, sir.
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"Remember no man is a failure who has friends." - Clarence (the Angel) Oddbody - It's a Wonderful Life

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