BUSINESS Law  101 / Probate

By Albert L. Kelley

Today we are going to start a series that may seem unrelated to business law-Probate. Probate is the process parties go through when someone passes away. While businesses generally do not file probate actions, probate is often necessary when a shareholder/member/sole proprietor/partner passes away. Indeed, probate is almost always required when there is an asset that is titled. This includes stock, vehicles, real estate, etc. Any time ownership of an asset is registered, there must be a probate to transfer the registration after the owner dies. The exception is when the property is titled in a trust or corporation rather than a person, or when there is a stated beneficiary. For example, if you have a bank account, you can tell the bank to list a beneficiary to that bank account. The account then does not need to be probated. The beneficiary merely needs to bring a death certificate to the bank and they will give the funds to the beneficiary. He funds travel outside of probate and are superior to probate.

There are different types of probate actions, depending on issues such as the relationship between the deceased and the person filing the action, the value of the estate, or the length of time the person has been deceased. These differences affect the cost of the probate action, the attorney fees for the case, the length of time the probate takes and the notifications that must be sent out. We will be discussing these different types of probate actions and when they apply.

There are some activities a corporation may take outside of probate. This includes what happens when a director passes away. Unless the articles of incorporation state differently, if a corporation has two or more directors and one passes away, the remaining directors can elect a replacement. This does not affect the shares the director may own-those must pass through probate. It also does not assist when there is a single director for the company. When there is a single director, the shareholders must elect a replacement. If the director was also the sole shareholder, a probate action must be filed so the personal representative can elect a replacement.

For Limited Liability Companies, the death of a manager can only be replaced by a vote of the members. If the manager is also a member, the surviving members elect the new manager, or if a single member LLC, the heirs must file a probate action to appoint a personal representative to run the business (The creditors of the corporation or LLC can also petition the Court to appoint a receiver outside of probate to run the business in order to ensure the creditors bills get paid).

When the deceased is a partner in a general partnership, the partnership ceases to exist on the death of the partner. This means the surviving partners need to create a new partnership or discontinue the business, but still must pay the deceased partner’s estate his value in the partnership.

When the deceased is a sole proprietorship, his heirs must file the probate action to get a personal representative who can continue the business until it is transferred to the decedent’s heirs, or is wound down.

Next week we will start discussing the probate process

Al Kelley is a Florida business law attorney located in Key West and previously taught business law, personnel law and labor law at St. Leo University. He is also the author of 4 law books: (“Basics of Business Law” “Basics of Florida’s Small Claims Court”, “Basics of Florida’s Landlord/Tenant Law” and “Basics of Starting a Florida Business” (Absolutely Amazing e-Books)). This article is being offered as a public service and is not intended to provide specific legal advice. If you have any questions about legal issues, you should confer with a licensed Florida attorney.

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