Business Divorce vs. Dissolution in Florida: Which Exit Fits Your Company?

A business divorce separates co-owners while the company keeps operating. Dissolution ends the company itself. Florida law gives you tools for both, and the path you choose first affects which options remain. Here is how they differ and what a Florida court looks for.

What Is the Difference Between a Business Divorce and Dissolution?

A business divorce separates the owners and the company survives. Dissolution winds the company up. Ask yourself whether you want to stop being in business, or stop being in business with this particular person. If it is the second, dissolution is a tool, not the destination.

“Business divorce” is not a defined term in the Florida dissolution and buyout statutes discussed here. It is shorthand for any owner separation in which the company continues: a negotiated buyout, a buyout under your buy-sell agreement or buyout agreement, a company redemption, or a court-ordered purchase.

Dissolution is different. When a Florida LLC dissolves, its activities and affairs must be wound up. In a judicial proceeding to dissolve an LLC, the court may appoint a receiver to wind up and liquidate the business or a custodian to manage it, and a receiver may sell company assets only if the court authorizes it. For the mechanics, see our page on business dissolutions and liquidations.

If you only want a co-owner gone, read our guide to removing a business partner or member under Florida law. General partnerships follow a different chapter of the statutes, covered in our post on partnership disputes in Florida.

Can You Dissolve a Florida Company by Agreement?

Yes, but only with the votes the statute requires, and in a falling-out your co-owner may hold them. For a corporation, the board adopts a resolution and shareholders approve it by a majority of all votes entitled to be cast, unless the articles or board require more (Fla. Stat. 607.1402). An LLC dissolves on, among other events, an event its operating agreement names or the consent of all members.

With two 50/50 owners, half the shares is not a corporate majority, and dissolving an LLC by consent takes all members. That is one reason contested separations may end up in court, covered on our page on voluntary and judicial dissolution of corporations, LLCs, and partnerships.

When Can a Florida Court Dissolve a Corporation or LLC?

A circuit court can dissolve a company only on statutory grounds, and the grounds differ for corporations and LLCs. In a proceeding by a shareholder, a court may dissolve a corporation if it is established that (Fla. Stat. 607.1430):

• The directors are deadlocked, the shareholders cannot break the deadlock, and irreparable injury to the corporation is threatened or being suffered, the business can no longer be conducted to the shareholders’ advantage generally because of the deadlock, or both.
• The shareholders are deadlocked in voting power and have failed to elect successors to directors whose terms have expired or would have expired upon qualification of their successors.
• The corporate assets are being misapplied or wasted, causing material injury to the corporation.
• The directors or those in control have acted, are acting, or are reasonably expected to act in a manner that is illegal or fraudulent.
• The corporation has abandoned its business and has failed within a reasonable period of time to liquidate and distribute its assets and dissolve.

Paragraph (1)(b) does not apply to a corporation whose shares are covered securities under federal securities law, or whose shares are not covered securities but are held by at least 300 shareholders with a market value of at least $20 million, not counting shares held by the corporation’s subsidiaries, senior executives, directors, and holders of more than 10 percent.

An LLC manager or member can seek dissolution if any of these is established (Fla. Stat. 605.0702):

• The conduct of all or substantially all of the company’s activities and affairs is unlawful.
• It is not reasonably practicable to carry on the company’s activities and affairs in conformity with the articles of organization and the operating agreement.
• The managers or members in control have acted, are acting, or are reasonably expected to act in a manner that is illegal or fraudulent.
• The company’s assets are being misappropriated or wasted, causing injury to the company or, in a member’s proceeding, to one or more members.
• The managers or members are deadlocked, the members cannot break the deadlock, and irreparable injury to the company is threatened or being suffered.

For more on stalemates, see voting rights and voting deadlocks. For your rights before a dispute reaches court, see LLC member rights and our overview of how Florida courts resolve shareholder disputes.

How Can a Dissolution Case Become a Business Divorce?

A shareholder’s dissolution petition can trigger a buyout instead of a shutdown. In a proceeding on the grounds above, the corporation, or if it does not elect, one or more shareholders, may elect to buy all of the petitioner’s shares at fair value (Fla. Stat. 607.1436).

The election may be filed within 90 days after the petition, or later if the court allows. If the parties agree on fair value and terms within 60 days after the first election, the court orders the purchase on those terms once it finds the payment is permitted under the statute’s distribution limits. If not, the court determines fair value as of the day before the petition was filed, or another date it considers appropriate. LLCs have a parallel election in a proceeding initiated by a member (Fla. Stat. 605.0706).

Know this before you file: once an election to purchase is filed, the case cannot be discontinued or settled, and the petitioner cannot sell the interest elsewhere, unless the court finds it would be equitable to the company and the other owners. For an LLC, a petitioner’s sale under a deadlock sale provision is also allowed. If the company or other owners elect to buy you out after you file, you can no longer drop the case.

In a corporate case, the court has other options too. On a showing of sufficient merit, it may appoint a receiver or custodian, appoint a provisional director, order a purchase of the petitioner’s shares, or grant other equitable relief short of dissolution. Your agreements can change the path as well. A deadlock sale provision, such as a buyout, a governance change, or a sale of the company, can control a deadlock instead of a court-ordered dissolution or buyout. It applies only to deadlock grounds, and the timing is strict:

• Corporations: The provision must sit in a shareholder agreement that complies with the statute on shareholder agreements, and it must be initiated and effectuated within the time periods for the corporation to act under the buyout statute.
• LLCs: The operating agreement’s provision must be initiated before the court determines that deadlock grounds exist, and then initiated and effectuated under its terms or by agreement of the members.

See our post on protecting your ownership stake before a dispute, and consider mediation in Florida business disputes first.

For co-owner conflicts generally, start with our shareholder disputes and derivative litigation page. Charles Jimerson‘s practice includes shareholder, partner, and ownership disputes.

What Facts Should You Check Before Choosing a Path?

Five facts change the answer for your company:

• Who holds the votes. Your ownership percentages, and whether the articles or the board require more than a majority to dissolve.
• What your agreements say. Whether you have a deadlock sale, buy-sell, or buyout clause, what starts it, and what deadlines apply.
• What kind of company you are. Corporation or LLC, and whether the corporate shareholder grounds are available to you.
• What you can prove. For a corporation, deadlock, waste, or illegal or fraudulent conduct. For an LLC, those facts plus whether it is not reasonably practicable to operate under the operating agreement.
• What your interest is worth. Who controls the books, since absent agreement the court sets fair value as of the day before the petition or another date it considers appropriate.

These facts decide which paths are open to you, and an attorney needs to review your documents before you file anything or send a demand.

Are you and a co-owner at an impasse over how to separate? Talk with a Jimerson Birr business divorce attorney before you send a demand letter.

How Can Jimerson Birr Help With a Business Divorce vs. Dissolution Decision?

Choosing between a business divorce and dissolution in Florida turns on documents and deadlines that need a lawyer’s review. Jimerson Birr’s business divorce attorneys represent shareholders, LLC members, and partners across Florida on both sides of the table. Call (904) 389-0050 or request a free consultation. A shareholder’s or member’s petition opens a 90-day window, longer if the court allows, for the company or other owners to elect to buy the petitioner out.