Dissolution of Corporations, Limited Liability Companies, and Partnerships

What is the dissolution of a corporation, LLC, or partnership?

The dissolution of a corporation, limited liability company (“LLC”), or partnership refers to officially ending a business entity’s existence. There are generally two types of dissolutions: voluntary dissolutions and judicial dissolutions. When co-owners need to separate but keep the company running, a business divorce attorney can help structure the exit.

A voluntary dissolution occurs when the owners of a corporation, LLC, or partnership voluntarily agree to dissolve the entity and follow the proper steps. A judicial dissolution occurs when a court orders the dissolution of a corporation, LLC, or partnership, often after the owners cannot resolve critical disputes or issues through normal business operations. A court may order judicial dissolution only on grounds the statutes list, such as a deadlock the owners cannot break, illegal or fraudulent conduct by those in control, or waste or misapplication of the entity’s assets, and, for an LLC or partnership, a finding that it is not reasonably practicable to carry on the business in conformity with its governing documents.

Need help with the dissolution of a corporation, LLC, or partnership? Schedule your consultation today with a Jimerson Birr business litigation attorney.

What legal issues typically arise regarding the dissolution of a corporation, LLC, or partnership?  

The following disputes are among the most common during the dissolution of corporations, LLCs, and partnerships:

• Distribution of assets: One of the biggest challenges in dissolving a business is dividing the assets among the owners or shareholders. Asset division can be complicated, primarily when shareholders dispute the value of certain assets or the proposed fair distribution of profits
• Tax implications: Dissolving a business can have significant tax consequences for the owners or shareholders. Understanding the tax implications of liquidating assets and distributing profits and any tax obligations associated with winding down the business is essential.
• Contractual obligations: If the business were party to any contracts, it would be necessary to determine whether they must be fulfilled, assigned to another party, or terminated.
• Employee issues: Dissolution commonly involves terminating employment for some or all of a company’s employees. The company must comply with applicable legal and contractual obligations concerning final pay, severance, unemployment benefits, and other employment-related issues.
• Creditor claims: Creditors may have outstanding claims against the business, and the business must address them as part of the dissolution process. Florida law provides notice procedures that a dissolved corporation or LLC may use to resolve claims and limit later liability.
• Disputes among owners or shareholders: Dissolving a business can be stressful and emotional, and disagreements among owners or shareholders are common. These disputes can be challenging to resolve and may require mediation or litigation.

What are relevant laws related to the dissolution of a corporation, LLC, or partnership in Florida?

The following Florida Statutes govern a business’s dissolution:

Chapter 607 codifies the Florida Business Corporation Act. In particular, Sections 607.1401 through 607.1410 govern voluntary dissolution, including who must approve the dissolution of a corporation and what a corporation must include in its articles of dissolution, and Sections 607.1430 through 607.1436 govern judicial dissolution.

Chapter 605 codifies the Florida Revised Limited Liability Company Act. Sections 605.0701 through 605.0717 govern the dissolution of LLCs, and Sections 605.0601 through 605.0603 govern dissociation. These sections include everything from events that can cause dissolution to the procedures for member asset distribution. The statutes also differentiate between a dissociation, when one member leaves and the rest of the LLC continues operating, and a dissolution, which ends the LLC.

Chapter 620 contains Florida’s partnership laws: Part I is the Florida Revised Uniform Limited Partnership Act of 2005, and Part II is the Revised Uniform Partnership Act. Sections 620.1601 through 620.1813 (limited partnerships) and 620.8601 through 620.8807 (general partnerships) govern the dissociation of partners and the dissolution of partnerships. Both parts are Florida’s versions of uniform partnership acts and are state law, not federal law.

What is required to dissolve a corporation, LLC, or partnership in Florida?

Dissolving a corporation in Florida requires the following:

• Approval: If the corporation has not issued shares, its board of directors, or a majority of its incorporators if it has no board, may authorize the dissolution. If it has issued shares, the board of directors must adopt a resolution proposing dissolution and the shareholders must approve it, generally by a majority of all the votes entitled to be cast unless the articles of incorporation or the board require a greater vote. Shareholders may also approve dissolution by written consent without board action.
• Filing Articles of Dissolution: After dissolution is authorized, the corporation files articles of dissolution with the Florida Department of State. For a corporation that has issued shares, the articles must include (1) the name of the corporation; (2) the date dissolution was authorized; and (3) if the shareholders approved the dissolution, a statement that they approved it in the manner required by law and by the articles of incorporation. The corporation is dissolved on the effective date of its articles of dissolution.
• Notice to claimants: A dissolved corporation may send written notice to its known claimants setting a deadline for submitting claims. It may also file a notice of dissolution with the Florida Department of State, or publish a “Notice of Corporate Dissolution” in a newspaper, so that claims not known to the corporation are barred unless a proceeding to enforce them is commenced within four years.
• Filing final tax returns: Florida’s corporate dissolution statutes do not require a tax clearance certificate. However, a business that owes Florida taxes arising from its operations and quits or transfers the business must file a final return with the Florida Department of Revenue and pay those taxes in full within 15 days.
• Winding up and distributing assets to shareholders: A dissolved corporation continues to exist only to wind up and liquidate its business. It must collect its assets, discharge or make provision for its liabilities, and then distribute its remaining assets among its shareholders according to their interests.
• Closing bank accounts and terminating business licenses: The corporation should close any bank accounts and terminate any business licenses it holds.

Dissolving an LLC in Florida requires the following:

• Approval of members: An LLC is dissolved upon an event or circumstance that its operating agreement states causes dissolution or upon the consent of all the members.
• Filing Articles of Dissolution: Upon a dissolution event under the operating agreement, the consent of all the members, or 90 consecutive days without any members, the LLC must file articles of dissolution with the Florida Department of State. The articles must state the name of the LLC, any delayed effective date of the dissolution, and the occurrence that resulted in the dissolution.
• Termination of business operations: Upon the filing of the articles of dissolution, the LLC must cease conducting its business and continue solely to wind up its affairs, including paying its debts and obligations.
• Distributing assets to members: In winding up, the LLC must first apply its assets to its obligations to creditors, including members who are creditors. Under Section 605.0710, any surplus is then distributed to return contributions that have not been returned, and then to members and dissociated members in the proportions in which they shared in distributions before dissolution.
• Notice to claimants: A dissolved LLC may use statutory notice procedures for known claims and other claims against it.
• Closing bank Accounts and terminating business licenses: The LLC should close any bank accounts and terminate any business licenses.

Dissolving a partnership in Florida requires the following:

• Dissolution events: A general partnership dissolves only upon events the statute lists, such as a partner’s notice of express will to withdraw from a partnership at will, the express will of all the partners to wind up the business, or an event agreed to in the partnership agreement. A limited partnership dissolves upon events such as an event specified in the partnership agreement or the consent of all general partners and all limited partners.
• Winding up business operations: After dissolution, the partnership must wind up its business, including settling any outstanding debts or obligations.
• Asset distribution: In winding up a general partnership, the partnership’s assets must first be applied to its obligations to creditors, including, to the extent permitted by law, partners who are creditors. Any surplus is then distributed to the partners in settlement of their partnership accounts.
• Filing with the State: A limited partnership must file a certificate of dissolution with the Florida Department of State and may file a statement of termination once winding up is complete. A general partnership is not required to file, but a partner who has not wrongfully dissociated may file a statement of dissolution, and persons who are not partners are deemed to have notice of the dissolution 90 days after it is filed. It is also a good idea to provide written notice to any creditors and customers to avoid confusion about the status of the partnership.
• Closing bank accounts and terminating business licenses: The partnership should close any bank accounts and terminate any business licenses.

When a set of facts is appropriate to meet the requirements of a potential dissolution of a corporation, limited liability company, or partnership, there are many paths an individual may take. Jimerson Birr takes a value-based approach, which means we look at each action with our clients from the point of view of costs, benefits, and potential liability. Then, based on our client’s objectives, we chart a path forward to seek appropriate remedies, such as:

• Revocation or reinstatement: A corporation or LLC that voluntarily dissolved may revoke its dissolution within 120 days after the effective date of its articles of dissolution, and an entity that was administratively dissolved may apply for reinstatement.
•  Reorganization of the business
• Sale of assets

To see what actions may be available for your unique situation, please contact our office to set up your initial consultation.

What are common defenses to the dissolution of a corporation, LLC, or partnership in Florida?

Common defenses to the Judicial Dissolution of Corporations, Limited Liability Companies, and Partnerships in Florida include:

• Jurisdiction: The defense could argue that the court doesn’t have the jurisdictional authority to dissolve the entity. Jurisdiction issues may occur if the entity was formed in another state.
• Improper procedure: Improper procedures may include failure to notify the involved parties or vote correctly on the dissolution.
• Merits of the case: The defense could push back against the case’s merits by arguing that the petitioner has not established any statutory ground for dissolution, for example, that there is no deadlock, no illegal or fraudulent conduct, and no waste of the entity’s assets.
• Alternatives to dissolution: Florida law allows courts to order remedies other than dissolution. In a corporate case, the court may appoint a receiver, custodian, or provisional director, order the purchase of the petitioning shareholder’s shares, or grant other equitable relief. In a shareholder’s proceeding, the corporation or other shareholders may also elect to purchase the petitioner’s shares at fair value. The LLC statutes provide similar alternative remedies and an election to purchase the petitioner’s interest.

To see what defenses may be available for your unique situation, please contact our office to set up your initial consultation.

Have more questions about the dissolution of a corporation, LLC, or partnership?  

Crucially, this overview of the dissolution of corporations, LLCs, and partnerships does not begin to cover all the laws implicated by this issue or the factors that may compel the application of such laws. Every case is unique, and the laws can produce different outcomes depending on the individual circumstances.

Jimerson Birr attorneys advise individuals and companies on the issues described on this page, including the merits of a claim or defense and the potential exposure. To discuss your situation with a Jimerson Birr attorney, call Jimerson Birr at (904) 389-0050 or use the contact form to schedule a consultation.