Sole entrepreneurs overwhelmingly choose the single-member limited liability company (SMLLC) as the business entity for their operations. Consequently, simplicity of formation and operation of SMLLCs is highly desirable, both to facilitate entrepreneurship and to acknowledge that costs, lack of knowledge, bad advice, or a combination of them very often will cause sole entrepreneurs to forego professionally drafted documents and accept default SMLLC rules in the jurisdiction of formation.

The death of the sole member is always an anticipated, indeed inevitable, occurrence, so one would expect that the default statutory rules and the widely available forms for SMLLCs would address this eventuality adequately. Unfortunately, that is not the case. In this Article, we address how SMLLC organizational documents should always address the death of the sole member of an SMLLC, and we conclude that a provision for the nonprobate transfer on death of the sole member’s interest should be included. We also address the federal tax consequences of death-time transfers of SMLLC interests, and we uncover a thorny conflict between federal income taxes, which disregard the entity, and federal transfer taxes, which regard the entity.