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.

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, most often when the owners cannot agree on the terms of the dissolution or resolve critical disputes or issues through normal business operations. In addition, a court may order judicial dissolution if it determines that it is in the best interests of the shareholders, members, or partners, or if the entity can no longer carry out its intended purpose.

Need help with the dissolution of a corporation, LLC, or partnership? Schedule your consultation today with a top 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 legal requirements for employee severance, unemployment benefits, and other employment-related issues.
• Creditor claims: Creditors may have outstanding claims against the business and must address them as part of the dissolution process.
• 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, Section 607.1401 dictates who may vote in the dissolution of a corporation and what corporation must include in its Articles of Dissolution.

Chapter 605 codifies the Florida Revised Limited Liability Company Act. Sections 605.0601– 605.0717 govern the dissolution of LLCs. 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 codifies the Florida Revised Uniform Limited Partnership Act. Sections 620.1601 – 620.1812 and 620.8601 – 620.8807 govern the dissolution of partnerships. These laws originate from the Federal Uniform Limited Partnership Act and Florida Revised Uniform Partnership Act.

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

Dissolving a corporation in Florida requires the following:

• Approval: The board of directors or shareholders must vote and approve the dissolution, depending on whether the corporation has issued shares.
• Issuing a Notice of Dissolution: The corporation must then file a Notice of Dissolution with the Florida Department of State. A Notice of Dissolution must include the name of the corporation, its date of incorporation, and a statement that the corporation has voted to dissolve.
• Obtaining a Tax Clearance Certificate: The corporation must receive a Tax Clearance Certificate from the Florida Department of Revenue to ensure that all tax obligations have been satisfied.
• Distributing assets to shareholders: The corporation must distribute its assets per its articles of incorporation and any shareholder agreements.
• Filing Articles of Dissolution: Once the corporation has satisfied its obligations, it must file the Articles of Dissolution with the Florida Department of State. The Articles must include the (1) the name of the corporation; (2) the corporation’s formation date; and (3) the date of its dissolution.
• Closing bank accounts and terminating business licenses: The corporation must close any bank accounts and terminate any business licenses it holds.

Dissolving an LLC in Florida requires the following:

• Approval of members: The members must approve the dissolution. Consent may be through a written agreement or a vote of the members.
• Termination of business operations: The LLC must cease all business operations and settle any outstanding debts or obligations.
• Issuing a Notice of Dissolution: The LLC must file a Notice of Dissolution with the Florida Department of State. This notice must include the name of the LLC, its date of formation, and a statement that the LLC has voted to dissolve.
• Distributing assets to members: If assets remain after paying creditors, the LLC must distribute them per its operating agreement and member agreements.
• Filing Articles of Dissolution: Once the LLC has satisfied its obligations, it must file the Articles of Dissolution with the Florida Department of State.
• Closing bank Accounts and terminating business licenses: The LLC must close any bank accounts and terminate any business licenses.

Dissolving a partnership in Florida requires the following:

• Approval of partners: The partners must approve the dissolution. Consent may be through a written agreement or vote of the partners.
• Termination of business operation: The partnership must cease all business operations and settle any outstanding debts or obligations.
• Asset distribution: The partnership must distribute its assets to the partners under the partnership agreement and other intra-partner agreements.
• Filing with the State: There is no requirement to file a notice of dissolution with the Florida Department of State for partnerships. However, it’s a good idea to provide written notice to any creditors and customers to avoid confusion about the status of the partnerships.
• Closing bank accounts and terminating business licenses: The partnership must 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. We are value-based attorneys at Jimerson Birr, which means we look at each action with our clients from the point of view of costs and benefits while reducing liability. Then, based on our client’s objectives, we chart a path forward to seek appropriate remedies, such as:

• Reinstatement–If the involved individuals remedy the underlying cause of dissolution or change their minds, they can reinstate the business.
•  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?

The primary 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 entity is still viable, that the claims against the entity are not valid, or that the dissolution is not in the best interests of the shareholders, members, or partners.
• Alternatives to dissolution: If applicable, members may assert better options than dissolution to serve better the interests of shareholders, members, or partners. These options may include a reorganization of the entity or a change in management.

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 guide our clients to help make informed decisions while ensuring their rights are respected and protected. Our lawyers are highly trained and experienced in the nuances of the law, so they can accurately interpret statutes and case law and holistically prepare individuals or companies for their legal endeavors. Through this intense personal investment and advocacy, our lawyers will help resolve the issue’s complicated legal problems efficiently and effectively.

Having a Jimerson Birr attorney on your side means securing a team of seasoned, multi-dimensional, cross-functional legal professionals. Whether it is a transaction, an operational issue, a regulatory challenge, or a contested legal predicament that may require court intervention, we remain a tireless advocate every step of the way. Being a value-added law firm means putting the client at the forefront of everything we do. We use our experience to help our clients navigate even the most complex problems and come out the other side triumphant.

If you want to understand your case, the merits of your claim or defense, potential monetary awards, or the amount of exposure you face, you should speak with a qualified Jimerson Birr lawyer. Our experienced team of attorneys is here to help. Call Jimerson Birr at (904) 389-0050 or use the contact form to set up a consultation.