Without a buy-sell agreement, Georgia's default LLC rules give a deceased member's estate only economic rights: a share of profits and distributions, but no vote, and the family becomes members only if all the other members consent. A written buy-sell agreement sets the triggers, the price, and the funding in advance. Call Parisi Law Firm at (404) 594-5130 for a consultation.
Most closely held businesses in Northeast Georgia are built by two or three people who trust each other. The roofing company started by two brothers. The HVAC outfit where one partner runs the trucks and the other runs the office. That trust works fine until something changes: an owner dies, gets hurt and can't work, wants to retire, goes through a divorce, or simply wants out. Then the questions come all at once. Who gets the departing owner's share? What is it worth? Where does the money come from? Who is still in charge?
A buy-sell agreement answers those questions while everyone is healthy and getting along. It is a contract among the owners, usually built into an LLC operating agreement or a corporate shareholder agreement, that says which events force or allow a buyout, how the price is set, and how it gets paid. Jerry Parisi drafts and reviews buy-sell agreements and succession plans for small businesses and trade contractors across Jefferson, Jackson County, Athens, Gainesville, and the rest of Northeast Georgia, and works alongside your CPA and estate planner so the legal, tax, and family pieces fit together.
What Georgia LLC law does if you have no agreement
Georgia gives LLC owners wide latitude to write their own rules. The LLC Act states a policy of giving maximum effect to freedom of contract and to the enforceability of operating agreements (O.C.G.A. § 14-11-1107). The catch is that if you don't write the rules, the default ones apply, and they rarely match what owners expect.
Unless the articles, a written operating agreement, or the written consent of all other members say otherwise, an individual member stops being a member at death (O.C.G.A. § 14-11-601.1). The member's executor or other legal representative steps in with only the rights of an assignee (O.C.G.A. § 14-11-506). An assignee receives a share of profits, losses, and distributions, but has no role in management until admitted as a member (O.C.G.A. § 14-11-502), and by default an assignee can become a member only if the other members unanimously consent (O.C.G.A. § 14-11-503).
In plain terms: your surviving partner may end up sharing profits with your spouse or estate indefinitely, with no obligation to buy them out, while your family holds an interest they can't vote and may not be able to sell. And by default a member can't simply withdraw from the LLC either (O.C.G.A. § 14-11-601.1(d)). A buy-sell clause replaces that uncertainty with a clear exit.
Shareholder agreements for Georgia corporations
If your company is a corporation, buy-sell terms usually live in a shareholder agreement. Georgia's Business Corporation Code gives shareholders several tools to plan ahead.
- Share-transfer restrictions: the articles, bylaws, or a shareholder agreement can require an owner to offer shares to the corporation or the other owners first, or can obligate the corporation or other owners to buy them (O.C.G.A. § 14-2-627). A restriction binds a buyer only if it is noted conspicuously on the share certificate or the buyer knew of it.
- Voting agreements: two or more shareholders can agree in writing how their shares will be voted, and those agreements are specifically enforceable, with a default maximum term of 20 years (O.C.G.A. § 14-2-731).
- Shareholder agreements that vary the Code's default rules: these must be in the articles or bylaws approved by all shareholders, or in a written agreement signed by everyone who is a shareholder at the time and made known to the corporation. They are valid for up to 20 years, are renewable, and their existence must be noted on share certificates or the information statement (O.C.G.A. § 14-2-732).
Triggering events every agreement should address
The heart of a buy-sell agreement is its list of triggers: the events that require, or give someone the option, to buy an owner's interest. For each one, the agreement should say who buys, whether the buyout is mandatory or optional, and on what terms.
- Death: the most common trigger, and the one where default law leaves families and surviving owners in the worst position
- Disability: define it clearly (for example, unable to work in the business for a set period) so nobody has to argue about it later
- Retirement: set notice requirements and whether a retiring owner can be paid over time
- Divorce: keep an ex-spouse from ending up with ownership or a say in the business
- Voluntary departure or termination: spell out what happens when an owner quits, is removed, or stops working in the business, including any restrictive covenants
- Deadlock: build in a tiebreaker or a buyout mechanism so a 50/50 disagreement doesn't freeze the company
Setting the price: valuation methods
An agreement that says 'the remaining owners will buy at fair value' without saying how fair value is determined is an invitation to a lawsuit. Most agreements use one of three general approaches, or a combination.
- Agreed value: the owners set a price and update it on a schedule, such as every year. Simple, but only works if the owners actually keep it current
- Formula: price is tied to a defined measure, such as book value or a multiple of earnings. Predictable, but a formula that made sense years ago may not fit the business today
- Appraisal: an independent appraiser values the interest when the trigger occurs, with the agreement spelling out how the appraiser is chosen and what happens if the owners disagree
Funding the buyout
A buyout price means nothing if nobody can pay it. Many owners fund death and disability buyouts with insurance, so the money is there when it's needed. For retirement or departure, agreements often allow payment in installments over a period of years, backed by a promissory note and security terms that protect the departing owner.
Agreements are usually structured one of two ways. In a cross-purchase agreement, the remaining owners buy the departing owner's interest themselves. In a redemption (or entity-purchase) agreement, the company buys it back. Each structure has different tax and insurance consequences, and those decisions belong with your CPA and financial advisor. Parisi Law Firm does not give tax advice; we draft the agreement to carry out the structure you and your advisors choose.
Contractors: when the departing owner holds the license
For residential and commercial general contractors, succession has a licensing problem most owners don't see coming. Under Georgia law, a business organization's contractor license is applied for through an individual qualifying agent and issued to both that qualifier and the business, and the business must have at least one qualifying agent to keep contracting (O.C.G.A. § 43-41-9).
If the company's only qualifying agent is the owner who dies, retires, or leaves, the business must promptly notify the licensing division and has 180 days from the end of that qualifier's affiliation to employ a new qualifying agent and apply under that person (O.C.G.A. § 43-41-9(e)(1)). A temporary, nonrenewable license available to an officer or partner covers incomplete contracts only. A good succession plan identifies and develops a second qualifier well before it's needed. Plumbing, electrical, and conditioned-air licenses have their own rules, which we can review on our licensing and compliance page.
Passing the business to family or key employees
Many owners want the company to go to a son or daughter, or to the foreman who has run jobs for fifteen years. That kind of transition works best when it's planned over several years: gradually shifting ownership, putting management authority in writing, and deciding how the outgoing owner will be paid.
- Update the operating agreement or bylaws so the incoming owner has clear authority
- Use a structured purchase, often with installment payments, so a key employee can afford to buy in
- Consider restrictive covenants tied to the sale; under the Georgia Restrictive Covenants Act, a court presumes reasonable in time a restraint on a seller that lasts the longer of 5 years or the period the seller is being paid, a presumption that can be rebutted (O.C.G.A. § 13-8-57(d))
- Coordinate with your estate planner so wills, trusts, and beneficiary designations match the business documents
- Plan the contractor-license qualifier transition described above
Common trigger events and what your agreement should say
| Trigger event | What the agreement should address |
|---|---|
| Death of an owner | Whether the buyout is mandatory, who buys (the company or the other owners), the price or valuation method, and how it's funded, often with insurance. Without this, a Georgia LLC member's estate holds economic rights only. |
| Disability | A clear definition of disability, a waiting period, the buyout price, and funding, which may include disability buyout insurance. |
| Retirement | Required notice, whether the buyout is optional or mandatory, installment payment terms, and any consulting or transition role. |
| Divorce | A right for the company or other owners to buy back any interest awarded to a former spouse, at a set price or formula. |
| Voluntary departure or removal | Buyout price (sometimes different for a 'good' versus 'bad' departure), payment terms, and reasonable restrictive covenants. |
| Deadlock | A tiebreaker, mediation step, or buy-sell mechanism that lets one side buy out the other instead of freezing the business. |
| Loss of the license qualifier (contractors) | A duty to notify the company early and help transition the license, plus a plan to employ a new qualifying agent within Georgia's 180-day window. |
Frequently Asked Questions
What is a buy-sell agreement?
A buy-sell agreement is a contract among a company's owners that sets what happens to an owner's interest when a triggering event occurs, such as death, disability, retirement, divorce, or departure. It spells out who buys, how the price is determined, and how the buyout is paid, so owners and families aren't left negotiating in a crisis.
What happens to my LLC interest if I die without a buy-sell agreement in Georgia?
Under Georgia's default LLC rules, your estate receives only an assignee's economic rights: your share of profits, losses, and distributions. It has no vote in management, and your family becomes members only if all other members consent. Your operating agreement can change these defaults, which is why a buy-sell clause matters.
What happens if the last member of a single-member LLC dies?
Under Georgia law, if the last remaining member dies, the member's legal representative becomes a member unless they opt out in writing within 90 days. Single-member owners should still plan ahead with an operating agreement and coordinate with an estate planner so someone can step in and run the business without delay.
How is the buyout price set in a buy-sell agreement?
Most agreements use an agreed value the owners update on a schedule, a formula tied to a defined measure like book value or earnings, or an independent appraisal at the time of the trigger. The key is spelling out the method clearly, including how an appraiser is chosen, so the price doesn't become a dispute.
What's the difference between a cross-purchase and a redemption agreement?
In a cross-purchase agreement, the remaining owners buy the departing owner's interest directly. In a redemption agreement, the company buys the interest back. The choice affects insurance ownership and tax results, so we work with your CPA to pick the structure; Parisi Law Firm drafts the agreement but does not give tax advice.
Our license qualifier is retiring. What happens to our contractor license?
If a residential or commercial general contractor's only qualifying agent leaves, Georgia requires the business to promptly notify the licensing division, and it has 180 days to employ a new qualifying agent and apply under that person. Planning a second qualifier ahead of a retirement is the safest approach.
When should we put a buy-sell agreement in place?
The best time is when the business is formed or when a new owner comes in, while everyone agrees and no one is sick or leaving. Existing businesses can add one at any time. Agreements should be reviewed every few years, especially if the valuation depends on an agreed price that needs updating.