Hi, I'm Katherine Taylor, the lawyer for business owners. I've been doing a series on the unintended consequences of certain provisions in LLC operating agreements, and here's another one. Many operating agreements serve as de facto estate-planning documents for an LLC owner's business interest. What do I mean by that? Most operating agreements include language explaining what happens if one of the LLC members dies.

Often, those agreements state that the surviving member can force a buyback of the deceased owner's interest. In other words, the surviving member can buy back that interest. Many operating agreements also specify that the purchase price is the book value of the business, which is often far less than its fair market value. So why can this be a problem? From an estate planning perspective, the LLC owner may have intended—based on their estate planning documents—that all of their assets pass to their beneficiaries, such as their adult children. Those children may reasonably expect to inherit an interest in the business when their parent dies.

However, if the operating agreement says one thing and the estate planning documents say another, the operating agreement controls. That means the beneficiaries may receive far less than expected—or no ownership interest at all. If you're an LLC owner doing estate planning, it's critical to have a business attorney—not just an estate planning attorney—review your operating agreement to make sure it aligns with the intent of your estate plan.