Joint Tenancy & Community Property with Right of Survivorship Membership Interests

New Arizona Limited Liability Company Act (ALLCA) Section 29-3401.E provides that two or more natural persons may own an LLC membership interest as joint tenants with right of survivorship and a married couple may own an LLC membership interest as community property with right of survivorship.  These types of LLC membership interests are created by one of the following methods:

Joint Tenancy with Right of Survivorship

1.  A written Operating Agreement expressly declares that two or more natural persons hold a transferable interest as joint tenants with right of survivorship or in joint tenancy with right of survivorship.

2. A written assignment of a transferable interest to two or more natural persons, who may include one or more assignors if the written assignment is signed by each joint tenant and contains the express written declaration that the joint tenants hold the assigned transferable interest as joint tenants with right of survivorship or in joint tenancy with right of survivorship.

3. It is created in the Articles of Organization if the Articles are signed by each joint tenant and contain the express written declaration that the joint tenants hold the assigned transferable interest as joint tenants with right of survivorship or in joint tenancy with right of survivorship.

Community Property with Right of Survivorship

4. A written Operating Agreement expressly declares that that a married couple holds a transferable interest as community property with right of survivorship.

5. A written assignment of a transferable interest to a married couple, who may include one or both assignor spouses if the written assignment is signed by each spouse and contains the express written declaration that the married couple holds the assigned transferable interest as community property with right of survivorship.

6. It is created in the Articles of Organization if the Articles are signed by each spouse and contains the express written declaration that the married couple holds the membership interest as community property with right of survivorship.

Consequences of the Death of a Member Who Holds a Membership Interest with a Right of Survivorship

If a member who holds a membership interest with a right of survivorship dies, the surviving joint tenant with right of survivorship or surviving spouse who holds a community property right of survivorship does not necessarily become a member of the LLC with respect to the acquired interest.  ALLCA Section 29-3401.H states:

“Each co-owner of a transferable interest, whether the transferable interest is held as tenants in common, joint tenants with right of survivorship, community property or community property with right of survivorship, shall have only the rights of a transferee with respect to the interest, both during the lifetime and following the death of any other co-owner, unless and until the co-owner becomes a member in accordance with subsection C of this Section.”

ALLCA Section 29-3401.C states:

“After formation of a limited liability company, a person becomes a member by any of the following:

1. as provided in the Operating Agreement.
2. as the result of a transaction effective under Article 10 [mergers & conversions] of this Chapter.
3. by agreeing to become a member, with the affirmative vote or consent of all the members.
4. as provided in Section 29-3701.A.3.

Bottom Line

Creating membership interests held jointly by members as joint tenants with right of survivorship or community property with right of survivorship does not happen automatically.  Even under current Arizona LLC you create these types of ownership interests by proper documentation signed by the joint owners or married couple.

I create joint tenancy with right of survivorship membership interests and community property with right of survivorship membership interests by including the proper language in the LLC’s Operating Agreement that is signed by the joint tenants or the married couple.  My Operating Agreements also provide that on the death of a joint tenant or married member the interest of the deceased that is acquired by the survivor is automatically given full membership status.

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How to Hire Richard Keyt to Prepare an ALLCA Compliant Operating Agreement

I invested a lot of time reading and studying Arizona's new LLC law because I know that all existing and future Arizona LLCs need an Operating Agreement that is drafted specifically for Arizona's new ALLCA.  My ALLCA compliant Operating Agreements contains 17 pages of new text that addresses Arizona's new LLC law.

Two ways to get an ALLCA compliant Operating Agreement:

  1. Hire me to form a new Arizona LLC, or
  2. If you have an existing Arizona LLC, hire me to prepare an Operating Agreement for the LLC.

Option 1 Form a New LLC: To hire me, Arizona LLC attorney Richard Keyt (6,200+ LLCs formed and 138 five star Google & Facebook reviews), to form your new LLC complete our online LLC formation questionnaire or call me at 480-664-7478 and give me your information. Your LLC will be formed the first Wednesday or Friday after we are hired.  See the “Contents of the Bronze ($397), Silver ($597) & Gold ($997) LLC Packages.

Option 2 Purchase an Operating Agreement:  If you have an existing Arizona LLC and want to upgrade to a new ALLCA compliant Operating Agreement complete our online Operating Agreement questionnaire.

2018-05-06T10:17:55+00:00April 29th, 2018|New Arizona LLC Act|0 Comments

About the Author:

The author of this article is Richard Keyt, an Arizona limited liability company attorney who has formed 6,000+ LLCs. His Silver & Gold LLC packages include the $85 expedited filing fee, a custom Operating Agreement and 170 ebook called the Arizona LLC Operations Manual. Connect with Richard at 480-664-7478 or on Google+